Scrip related to stocks and bonds

Scrip is highly diverse

Other than stocks and bonds, "scrip" is probably the most diverse evidence of financial interactions between companies and their investors. In fact, one-fourth of all certificates cataloged in this project's "other" category are forms of scrip.

Strictly speaking, scrip is a substitute or alternative currency. It is usually a form of credit. Most scrip acknowledges or implies an existing debt by the issuer. Many examples of scrip in this database represented dividend payments or interest payments that were only convertible into additional shares or bonds.

"Scrip" can mean different things to collectors in other hobbies. The paper money hobby recognizes scrip as unofficial paper money. The exonumia hobby recognizes non-official coinage as scrip. Vast numbers of metal scrip were minted for coal companies up and down the length of Appalachia. Coal company scrip was a de facto form of currency and coinage, but was redeemable only in company stores.

Most railroad scrip was purposely designed to resemble currency. That kind of scrip generally circulated as currency within company service areas, but was only occasionally redeemable in U.S. coinage. That type of scrip is considered part of the obsolete currency collecting hobby; it is NOT cataloged in this project.

If railroad scrip RESEMBLES PAPER MONEY, then it is usually beyond the bounds of this project.

This project catalogs railroad scrip only when it is directly related to shares or bonds.

The item shown above is a typical example of railroad scrip. It is quite plain and was redeemable only for the         purchase of more stock. Below is an enlargement of that item with text re-arranged for easier reading. Notice that this type of scrip directly references partial payment for capital stock. (Image courtesy Dr. Thomas O'Shaughnessy)

Railroad currency

Railroad currency is definitely problematic. One such example is the $10 note shown at right, Many collectors have asked that I catalog railroad currency. I wish I had the time to do so. However, no matter how much I enjoy railroad currency, I designed this project to deal with stocks and bonds. Scrip that was intended to circulate as paper money clearly qualifies as obsolete currency.  Such currency is solidly part of that collecting hobby.

On the other hand...

The item shown below is one of a handful of similar notes that have resulted in one of the most persistent inquiries over the decades. The example shown is a $100 dollar note issued by the Scioto & Hocking Valley Railroad Company. Many thousands of businesses issued similar private currency during the 1850s and 1860s. Notes like this were meant to be tradable for goods and services beyond the railroad company itself. Its intent clearly places the item in the obsolete currency hobby.

Notes like this, and a few others, were purposely labeled as "Rail Road Bonds." And therein lies the rub.

This particular note claimed to be a "Rail Road Bond." It promised to pay 7% annual interest five years after date. In other words, the company promised to pay the holder $135 in 1859. The "promise to pay" clearly defines this note as a "promissory note." No argument there.

The greater question, though, is whether the word BOND was legitimate. I understand that the distinction between "promissory note" and "bond" might seem an overly fine point to some collectors. I do not believe promissory notes like this quality as "bonds." If you examine this note, you will find that it lacks any:

• stated contractual obligation between the company and the bearer, 
• stated or implied remedy in the event the company defaulted on its promise, 
• stated pledge of property or other collateral to guarantee the company's promise.

In other words, the notes show is no stated bond between the company and the bearer. It is simply an I.O.U. and nothing more.

These notes are highly collectible in the obsolete currency hobby, bit I exclude currency from this project. Because of the time it takes to catalog and track stocks and bonds, I am forced to apply the "quacks like a duck" rule to railroad currency:

My more formal reasons for excluding currency like this include:

• Railroad currency, like the ones shown, never offered a legitimate contract to holders. Without a "binding" contract for repayment, no document can be considered a bond regardless of how it might be labeled.
• Auction houses and currency dealers sell railroad currency as part of the paper money hobby. Researching and tracking prices of obsolete currency would be burdensome and take away from the main purpose of this project.
• I firmly believe obsolete railroad currency was printed and issued to circulate as currency.
• Some companies purposely titled some currency as "bonds" in order to take advantage of legal loopholes that legislated which businesses could issue paper money.

Collectors might ask where they can find more information about railroad currency. Unfortunately, I do not know of a guidebook specifically focused on railroad currency, but I hope someone will tell me if there is.

The best reference I know of was a long-running series of articles by Richard T. Hoober titled, Railroad Notes and Scrip of the United States, the Confederate States and Canada. That highly valuable series occupied 107 pages spread over 34 issues of Paper Money published between September, 1983 and November, 1989. Paper Money is the official publication of the Society of Paper Money Collectors. Back issues have been scanned and are available online at Newman Numismatic Portal. While Hoober did not catalog the Scioto & Hocking Valley Railroad Co scrip shown above, he did list a similarly-worded example from the Columbus & Lake Erie Rail Road Co., dated 1850.

Other obsolete currency publications that have touched on railroad scrip include:

• Georgia Railroad Paper: Stock certificates, bonds and currency issued by railroads operating in Georgia 1933-1932 by Gary Eubanks, James Eubanks and Steve Storey (2008, 211 pages, readily available online)
• small single-subject monographs by John A. Muscalus and published by Historical Paper Money Institute. These are not available on the Newman portal but can be found almost continually on eBay and online through used book sellers. Titles include:
  • Georgia Railroad Currency Comprehensively Illustrated (1975, 33 pages)
  • Mississippi Railroad Currency Comprehensively Illustrated (1977)
  • Railroad Currency: Bank notes and scrip representative of over one hundred railroads, 1830's-1900 (1971, 43 pages)