More Than 400 Years Ago, This Company Launched World's First IPO In The Year 1602

From Google, Facebook, LIC, Zomato, and Saudi Aramco, you must have heard about the IPOs and listings of a lot of big and small companies in the history of the stock market.

But are you aware of the world's first ever IPO? And when did it happen? 50 years ago? 100 years ago? Well, no. It happened more than 400 years ago!

World's' First Ever IPO In 1602

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The Dutch East India Company (VOC) held its ¡®initial public offering¡¯ (IPO) in August 1602. It was the first of its kind in world history and therefore a key event in financial history and the history of the capitalist world.

The IPO had been announced in the VOC charter¡ªthe company¡¯s founding document of March 20, 1602. "All the residents of these lands," stated article 10, "may buy shares in this company." Subscribers could decide for themselves how much to invest; there was no minimum or maximum. The next article stated that posters would be put up announcing the IPO, as per various media reports.

There had been companies before the VOC that had issued shares¡ªthe so-called ¡®pre-companies¡¯ that merged into the VOC in 1602 had private shareholders, and their financial structure was modelled on earlier shipping companies in the Southern Netherlands and Italian city-states like Genoa and Venice. What sets the VOC apart from these earlier companies is, first of all, the public character of the share issue. Every Dutchman was invited to invest. This was a big difference from the previous companies, which had raised their capital from a small circle of private investors around the directors.

Also Read: ITC Likely To Launch Separate IPO For Its Hotel Business In 2024

How The IPO Was Conducted

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The scale of the share offering was unprecedented. The setting, however, must have felt familiar. As the company did not yet have its own offices, investors in the Amsterdam branch were invited to come to the private house of the wealthy merchant Dirck van Os, co-founder of the VOC, to subscribe money to the company¡¯s initial capital. During the month of August 1602, Van Os and the other directors took turns overseeing the bookkeeper as he entered investors in the register.

The founding directors of the VOC were well-known merchants. This likely contributed to investors¡¯ willingness to put in money. This is important because it is not obvious that people were enthusiastic about the new company. Some of the pre-companies had been highly profitable, but unlike those companies, the VOC was supposed to wage war against the Portuguese in Asia, which would cost a lot of money. Also, because the States-General were seeking resilience and a permanent Dutch presence in the Orient, the VOC was supposed to stay in business for a long time, much longer than any of its predecessors.

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Also Read: 20 Must Know Terms Before Investing In Any Company's IPO

Money Locked Up For 21 Years

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The company¡¯s first charter was granted for 21 years. In the event, the Company existed for much longer¡ªalmost two centuries¡ªbut compared with the average lifetime of its predecessors, twenty-one years seemed like an eternity. The pre-companies usually operated for three or four years. The cargoes were auctioned off when the flotilla returned, and if the ships were still in good condition, they were sold to a new enterprise. The accounts were drawn up, and the investors were paid their share of the proceeds.

The authors of the charter must have realised that this long horizon might deter some interested individuals from investing their money, so they included a provision for the interim liquidation of the VOC. After ten years¡ªin 1612¡ªa "general balance" would be drawn up. In other words, the company would disclose how it was doing, and shareholders would have the option of asking for their money back.

Also, at some point between the granting of the charter on March 20, 1602, and the opening of the share registers on August 1, the directors realised that ten years was also a long time. Investors might well be wary of committing their money for such an extended period. On the first page of the capital subscription register, they therefore included an extra provision: "Conveyance or transfer [of shares] may be done through the bookkeeper of this chamber." The subscribed capital could be transferred to someone else! This had probably also been possible with the earlier companies that had issued shares, but never before had it been stated so explicitly in an official document that shares could be traded. This provision meant that investors did not have to wait until 1612 before they could get their hands on the capital they had invested. If they wanted to, they could sell their shares before that. The procedure for doing this was also set out on this page. Shareholders had to present themselves to the bookkeeper of the chamber where they had deposited their money, and two directors had to give their approval for the conveyance. The bookkeeper would make "accurate notes" of the transfers "in a special register."

1,143 Investors For The IPO

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When the IPO closed on August 31, 1602, 1,143 investors had subscribed to the initial capital of the Dutch East India Company¡¯s Amsterdam branch. The second-to-last subscription was made by Neeltgen Cornelis. She was Dirck van Os¡¯s maid and had seen investors coming and going all month. She subscribed for a hundred guilders, for which she had had to work long and hard; her wages were less than fifty cents a day. This seems to have inspired the bookkeeper, Barent Lampe, to pay his servant a bonus. The very last entry in the book reads, "Barent Lampe for Dignum Jans __ 50 guilders."

When these last subscriptions were registered, notary Jan Fransz Bruyningh embarked on his closing statement in the book. He wrote that he and his two witnesses had overseen how all the amounts in the register had been tallied, that on the stroke of midnight a total sum of 3,674,945 guilders had been subscribed, and that not a nickel or dime had been paid in after twelve o¡¯clock, as per the report.

There were six semi-independent branches of the VOC, and each held its own IPO. Of the total amount raised in August 1602¡ªalmost 6.5 million guilders¡ªAmsterdam provided 57 percent of the total capital, followed by Middelburg with 20 percent, and the remaining four chambers with considerably less: Enkhuizen contributed 8 percent, Hoorn 7 percent, Delft 4 percent, and Rotterdam 3 percent. It is quite possible that the prevalence of the Amsterdam chamber in the company¡¯s initial capital would have been even greater were it not for the fact that there had been a serious outbreak of the plague in the city during the summer of 1602, and consequently many people had fled the city. Only the shares of the Amsterdam branch (and, to a lesser extent, the ones of the Middelburg branch) were later actively traded.

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