Worthless securities are not just for covering walls any more. The paper they are printed on may be worth more than their nominal value, if the certificates are antique, rare or decorative.
Yesterday's financial failures -- defaulted bonds and invalidated securities -- have become today's successful souvenirs. The paper left by stock swindlers like Ivar Kreuger, the Swedish match king of the 1920s, is as valuable to collectors as the golden tickets issued by the John Paul Getty. The international market for historic certificates -- such as Confederate, pre-revolutionary Russian and Imperial Chinese bonds, bankrupt railroads and gold mines -- has been booming for the past three years in West Germany and France and, more recently, in Great Britain. The British have even coined a word for it: scripophily.
In the words of a London dealer, it is to hobbyists what stamp collecting was a century ago. There are an estimated 15,000 scripophilists around the world compared with 20 million philatelists. Record prices are made in the low thousands of dollars, not hundreds of thousands, as in the case of the rarest stamps.
Scripophily is in bouncing babyhood in this country. The first public auction of old securities was held in March 1980 in New York. This month there will be two major auctions here. Miami had its first auction Feb. 19, sponsored by Nonvaleurs International Ltd., a West German company with headquarters in Hanover. The top price of $1,900 was paid for a batch of Confederate bonds; other high prices were $1,100 for a Standard Oil Co. share signed by J. D. Rockfeller and $270 for a Chinese tramway bond. According to director Wilhelm Kuhlmann, these prices are just about half what such items now bring in West Germany.
During the past year, prices in the United States for some old securities have shot up between 100 percent and 300 percent, according to John Herzog of R. M. Smythe & Co., Inc., a 101-year-old firm on lower Broadway that specializes in obsolete and inactive securities. "Prices levels for rare certificates are still way below [those of] coins or stamps of similar rarity. We think certificates may well catch up some day," said Herzog.
Clive Huggins of Stanley Gibbons, a London dealer, anticipates old securities will continue to appreciate by about 20 percent a year in the international market. Yet he expects quality American securities may show much greater gains in his firm's first New York auction on Friday because a country's history is always more appreciated in the home country.
The oldest known existing certificate is a share of the United Dutch East India Co., established in 1602. It is owned by the Amsterdam Stock Exchange, where it is on display, and it is insured for one million guilders ($425,000). The record auction price for an old security was $32,000, established in London in September 1979. (The security had been offered for sale the previous year for $1,500.)
The world's most valuable "busted" bond was issued in 1898 by the Chinese Imperial government. One hundred of the 500-pound-denomination bonds (the pound was worth $5 then) were countersigned by the Deutsche-Asiatische Bank in Berlin. The mauve, black, red and buff certificate, drafted in English and German, bears Chinese seals, including the chop or signature block of the emperor's envoy.
By the time the Manchu dynasty was overthrown in 1911, four-fifths of the 4 1/2 percent gold loan totaling 16 million pounds was paid off. That leaves just 20 certificates in existence today. There have been recent negotiations in London between the People's Republic of China and some of her trading partners about the possibility of paying off some of the country's old debts. Yet, even were this bond redeemed in full -- 20 percent or 30 percent redemption is more common -- it would be worth just $1,125 at today's exchange rate.
Fewer than 5 percent of today's purchasers of old bonds are speculators who are hoping that the bonds will be redeemd, said Huggins. Quite obviously, speculators go after those bonds whose value as collectibles is less than the face value; there are some of these in the Stanley Gibbons sale. True scripophilists are concerned instead with a certificate's historical significnce as shown mainly in its autographs, together with its age or rarity. Yet a surprising number are bought by interior decorators who frame and hang them like Japanese prints. Banks and brokerage firms also prize them as financial art, so condition becomes an important price determinant.
Another 1898 Chinese bond, almost identical to the record holder, bears a pre-sale estimate of $25,000, although Herzog thinks it will go for much less. The value of a 1912 bearer bond with the coat of arms of the City of Nikolaef in czarist Russia is estimated at $15,000. (A similar one was valued at $600 in 1979.) A Spanish shipping company bond dated 1749 has an estimated value of $7,000; the same bond was sold for less than half that amount in London in November 1978.
Both experts agree that these European issues have become overpriced now that profit taking has begun. They say that there are better buys in American securities, particularly railroads. Stanley Gibbons' catlogue lists an 1878 Standard Oil Co. share handsigned by J. D. Rockefeller at $1,000. A similar Rockefeller share, priced at $150 in October 1979 before auction fever struck, is worth $1,800 to $2,000 today, according to John Herzog.
Other highlights of the Stanley Gibbons sale of 350 lots include an 1866 American Express $500 share handsigned by Henry Wells and (William George) Fargo, estimated at $480, and a 1795 certificate for 25 shares in the North American Land Co., signed by Robert Morris, a signatory of the Declaration of Independance, and James Marshall, brother of the first chief justice of the United States, at $420. A number of handsome copper-plate 19th Century railroad stock certificates have an estimated value of less than $100.
At the Smythe sale, to be held March 26, the lot with the highest reserve of $7,500 is a series of New York Yankees corporate documents dating from 1912 to 1960. The estimate for a Chinese bond signed by underwriter J. P. Morgan is $2,500 to $3,000. Other certificates up for auction bear the signatures of P. T. Barnum, the circus magnate; and financiers John Jacob Astor, Jay Gould and E. H. Harriman. A 1775 Massachusetts Bay Colony obligation that sold last October for $1,600 is up for sale again.
The next "hot" areas where the biggest appreciation can be expected, in Herzog's opinion, are 18th Century and early 19th Century American, Latin American and African securities. CAPTION: Picture 1, The most valuable "busted" bond, issued by Chinain and sold for $32,000 in 1979. Stanley Gibbons Auction Galleries Inc.; Picture 2, 1775 Massachusetts Bay Colony note sold in October for $1,600 and is for sale again. R. M. Smythe & Co. Inc; Picture 3, Standard Oil Co. share, which was signed by John D. Rockefeller in the lower right-hand corner, is worth an estimated $2,000 today. R. M. Smythe & Co.,Inc. Picture 4, no caption