Collectors Are Shelling Out $395 for Bear Stearns Stock Certificates

(Bloomberg Businessweek) -- “I should have bought more Lehman” is not something you hear every day.

But it’s an honest regret for Bob Kerstein, who makes a living buying and selling what traditional investors would consider worthless equities. During the financial crisis, JPMorgan Chase & Co. bought Bear Stearns Cos. for $10 a share. Kerstein will sell you one for $395. A share of Countrywide Financial Corp., taken over by Bank of America Corp. for less than $5 a share, will run you $199.95. Prefer fixed income? You can get yourself a piece of a vintage Countrywide collateralized mortgage obligation for $169.95.

Before computers took over markets, issuers of equities and bonds gave out paper certificates, usually featuring artwork that depicted the companies’ business, which were shuffled among brokerage houses. (Some companies continued to put out certificates even after they became functionally obsolete.) Certificates of failed, acquired, or otherwise defunct companies were supposed to be thrown out. Some got diverted on the way to the dump or were found tucked away in long-forgotten file cabinets or safe-deposit boxes. A niche group of collectors in what’s known as the scripophily market will pay top dollar for certificates of famous failures. The more epic, the better.

“What I used to say is, the flops are worth more dead than alive,” says Kerstein, a dealer in Virginia whose stocks and bonds can be found on Scripophily.com. “Like the Enrons. They were selling for a dollar or two apiece. Once the company died, they were selling for a couple hundred.”

In the past few years, there’s been fresh interest in the equities and bonds of Donald Trump’s failed casino company. A 1999 Trump Hotels & Casino Resorts Inc. stock certificate that’s in “practically pristine” condition, featuring a head-and-shoulders portrait of the Donald hovering over the Atlantic City boardwalk, is available on EBay at a buy-it-now price of $800. The stock itself was delisted after trading for about a buck or two following the company’s first trip to bankruptcy court in 2004.

The seller of the Trump certificate is Don Mesler, a retired stock and convertible bond trader in New Jersey. He got it and others from a dealer friend of his, who passes on certificates for him to sell on consignment on the web. This was after the casino company filed for bankruptcy but years before Trump ran for president. “Believe it or not, they started at $24.95,” he recalls. “They didn’t sell like dynamite.”

Robert Schwartz, a dentist who splits his time between working on teeth and dealing in financial certificates and other collectibles, has sold a few Trumps in recent years, too, at his auction house Archives International Auctions. “I think some people are buying it because they love Trump, while the majority are buying it because it’s a novelty,” he says.

Sometimes the shareholder who signed the certificate is the attraction rather than the company itself. A Jefferson Stores Inc. certificate signed by imprisoned Ponzi schemer Bernie Madoff is on offer at the website OldStocks.com for $6,500, reduced from a previous asking price of $12,000. “There are a lot of people who collect fraud, just like a lot of African Americans collect slavery documents, a lot of Jewish people collect anti-Semitic material,” says Chris LaBarre, who runs George H. LaBarre Galleries in New Hampshire with his father, George. “That’s just the way the collectible world works.”

Some certificates with more-noble backstories have also done well. One of the higher-priced items for sale at LaBarre Galleries is stock of Beech Creek Railroad, signed by Samuel Clemens, aka Mark Twain. It’s offered at $7,500. Schwartz was once consigned a federal bond from 1792 that was issued to, and signed by, George Washington himself. Schwartz ended up auctioning it off for a record price of $265,000. “The winner had no limit. He said he would’ve gone up to a million,” he recalls.

The trade-deficit-fixated Trump may be interested in this collectors’ market for another reason: China is a big importer of paper stock certificates, according to Schwartz. “China is such a big market,’’ he says. “There are a lot more collectors over there. They collect things that we would probably think are very strange.”

Some of the demand from China is for shares that are remarkably American in flavor. Vintage certificates of the Kentucky Fried Chicken Corp. featuring a portrait of Colonel Sanders are usually sold quickly to buyers in China, where the fast-food chain has done a robust business since opening its first restaurant near Mao Zedong’s tomb in Tiananmen Square in 1987. “Every time I put one online, I sell it for $150, $200 without even trying,” Schwartz says.

To contact the editor responsible for this story: Pat Regnier at pregnier3@bloomberg.net

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