Definition
A stock certificate is a formal or official document that is issued to the owner of a stock.
Stock Certificates typically include all relevant information associated with the ownership of a stock such as the total of number of share the individual or entity owns as well as its ID number, company seal, and date of purchase.
The initials of the business executive are added as well. The purpose of the stock certificate is to give individuals a way to verify their ownership of a stock. It also serves the purpose of preventing any theft or fraudulent activity that would happen in the absence of such a precaution.
What Does Stock Certificate Mean?
In business, stock certificates have surged in popularity in the last few decades. This is primarily due to the fact that stocks are no longer sold physically and just done only digitally now. However, stock certificates still aren’t very prevalent as paper certifications or notifications are a thing of the past at this point and many companies offer their own verifications for stock holders.
Example
Jimmy owns a computer technology company called ‘Tech Guys in Disguise’. His computer tech company specializes in just about every type of computer technology that one can purchase. Jimmy recently decided to formally launch as an IPO, meaning his stocks were available to be traded. One company, called Jimmy John’s sandwiches and subs, bought about 250 stocks from Johnny. That company also decided to request a stock certificate to verify their purchase and holdings.
Because of their request, Jimmy, the owner of the computer technology company, is contacted by the United States’ Central Securities Depository, which handles the issuing of these securities, and they ask him for his signature to verify the purchase along with the signatures of any other relevant executives. Jimmy obliges, and he provides the executive signatures. Jimmy Johns’ then receives a completed stock certificate from Jimmy’s computer technology company stating that he is indeed the verified owner of the 250 stocks in question.
