August 25, 2019

What can we learn from serial numbers?

With the exception of serial #1, advanced collectors don't pay much attention to serial numbers. Back in the 1990s, I saw minor premiums paid for serials #2 and #3. Since then, any enhanced amounts paid for serials other than #1 are lost in normal variations in prices.

I occasionally see amateur eBay sellers promote "low numbered" certificates with serial numbers above one or two hundred as being somehow special. I don't see anyone falling for such hype.

Collectors who contribute to my project know I record prices and serial numbers of every certificate I add to the database. Serial numbers give me the ability to track scarcer varieties through time. Admittedly, recording serial numbers takes additional time. The payoff is the increased opportunity to discover new sub-varieties. I constantly compare images of lowest and highest serial numbers so see if they look identical. When they don't, I get to create new listings.

During the process of examining thousands of serial numbers each year, I find a substantial numbers of errors in earlier reports of handwritten serial numbers. Some handwriting was quite legible and precise, particularly when companies were new. However, when certificate numbering rose into the thousands, handwriting often grew hurried and sloppy. One such example can be seen on stock certificates  from the New York Sleeping Car Company where the medallion for serial numbers was too small for clerks tasked with issuing certificates.

Lacking the luxury of having multiple certificates for comparison, smaller dealers and amateur sellers often misinterpret handwritten serial numbers and dates. This is especially the case where ink has faded and certificates have grown yellowed and soiled.

We all know old certificates display handwritten serial numbers and recent ones have printed numbers. But when did the change occur?

Truth be told, handwritten serial numbers never fully disappeared. Small and start-up companies still use generic certificates and still number their certificates manually. Many of those certificates come from the Goes Lithographing Company which has been printing lithographed stock certificates for 140 years. The question is, when did printed numbering become the predominant method of numbering stocks and bonds.

The earliest printed serial number I know about is #14 found on an 1846 stock certificate from the Utica & Schenectady Rail Road Company (UTI-688-S-50). Knowing that the vast majority of certificates have already vanished into landfills and furnaces, I place the probable date of the first machine-printed serial numbers to have been about 1844 or 1845.

In terms of absolute numbers of certificates, machine-printed serial numbers on stock certificates probably outnumbered handwritten numbers sometime around the Civil War. However, in terms of extant certificate varieties, machine-printed serial numbers did not predominate until 1879.

With exceedingly rare exception, railroad companies seldom enjoyed profitability for long. Relatively few companies avoided the ultimate "embarrassment." In bankruptcy, the ownership of debt in the form of bonds is always superior to ownership of stock. Remembering that the vast majority of railroad debt existed in the form of bearer bonds, we can see why detecting and preventing the redemption of fraudulent bonds was always so important to companies.

Even from the earliest days, bonds employed more anti-counterfeiting measures than stocks. While printed serial numbers were easy to imitate, serial numbers had to be printed on front, backs and coupons of bonds. That added an additional challenge for counterfeiters.

Because reliable serial numbering has always been important, I suspect that machine numbering was used on bonds as early as on stocks. However, the first bonds seen in the database with printed serial numbers are those from Havana Railways dated 1850, four years after their earliest appearance on stocks. Again, I suspect this is a function of survivability rather than delay in acceptance.

If we examine certificates in terms of varieties, it appears bond printers embraced machine-numbering more quickly than those who printed stock certificates. In fact, over 50% of bond varieties had machine-printed serial numbers by 1867, twelve years earlier than stocks.

In this case, I do not think the wide time difference is entirely due to survivability of certificates.

Obviously, the American Bank Note Company printed huge numbers of bonds after its formation in 1858. What many collector may not realize is that the company initially made the majority of its income printing paper money, not securities. As a consequence, ABNCo had embraced machine serial numbering earlier than most of its competitors. The company did not really get into stock and bond printing in a major way until about 1870.

The giant American Bank Note Company was singlehandedly responsible for printing one-third of all the certificates in my database. The actions of all other printers and engravers are literally lost in its shadow. We must remove ABNCo from the mix to see how the rest of the security-printing world lived.

We find 312 companies picked up the crumbs that ABNCo left and were responsible for printing 5,324 varieties of bonds. That meant each company produced an average of 15.85 bonds. It is important to remember, that while there was repetition of overall design content among different denominations of the same issue, every bond issue involved custom design, engraving and printing. Theoretically, custom designs would have generated more income than off-the-shelf designs.

Conversely, tremendous numbers of stock certificates were generic designs, differing primarily in company name, state and capitalization. Diminished design complexity allowed 846 companies to compete in the stock-printing business. They were responsible for a total of 8,439 varieties, or an average of 9.98 varieties per printer.

Is a 59% difference in the number of varieties produced (15.85 versus 9.98) significant enough to account for bonds adopting machine serial numbering twelve years earlier than stocks? I think so, especially when combined with a greater need for protecting the integrity of debt issued in the form of bearer bonds.

I admit, this has been a long and tedious way around the subject of lowly serial numbers. Equally, I admit hardly anyone cares. Still, I hope I have given you an appreciation that even minor details can hold interest in this vast hobby.

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