On 9 September 1606, the very first share in the world was issued. Patrick Verwijmeren, Professor Corporate Finance at Erasmus School of Economics, is a guest at the NPO Radio 1 programme Spraakmakers to give us an idea of what that first share actually entailed.
The VOC (Dutch East India Company) share from 1606 is the first share of which physical evidence has been found. By buying a share you are actually buying a piece of the company, Verwijmeren explains. "That was the innovation back then. You can imagine that the Netherlands wanted to build large ships so they could travel to distant countries during that time. That costs a lot of money and there is also a lot of risk involved. So how do you raise a lot of money and who wants to take that risk?" By issuing shares the VOC was able to spread the risk while raising money for its ships.
"That share was actually very clever," Verwijmeren says. "You have limited liability. You can lose your money, but you are not liable. You share in the profits, and you can trade. You also don't have to be very wealthy to participate in the business." This was a great development that also benefited the Netherlands because it allowed them to build more ships.
The first stock exchange followed soon after, where prices were determined based on supply and demand, Verwijmeren explains. "Now, of course, you have much more information. Back then it was just a matter of gambling: will this ship return? And if it comes back, what does it have with it?"