One focus of ScripoPapers’ collection is financial scandals and the related (securities-)stories. A beautiful security in this respect is the one of the Capital Growth Company S.A. in Costa Rica. However, the quality of the underlying investments should not be inferred unquestioningly from the valuable feel and the appealing design of the paper, as the following comments will show.
The Capital Growth Fund, the fund of funds and predecessor vehicle of the Company, was founded in the Bahamas in 1962. Shares were offered for sale primarily in Europe through direct sales. The fund of funds invested primarily in the two investment vehicles Capital Growth Fund and Capital Growth Real Estate Fund. New Providence Securities acted as the management company. The fund of funds was placed with private investors and was able to acquire several hundred million euros in Europe. However, the fund’s assets were subject to strong fluctuations in value throughout the period and recently suffered high losses.
The fund manager New Providence Securities, headed by Clovis W. McAlpin, relocated to Costa Rica in 1971. Capital Growth Company S.A. was founded in San José as a holding company for the two fund vehicles and the fund of funds was liquidated. The investors received preferred shares in the new company as compensation for their shares in the fund of funds. Preference shares are shares in a company where the shareholder has different rights than with ordinary shares. Theoretically, the preference shareholder benefits from a higher dividend payout. However, the preference shareholder has no say and cannot influence the progress of the company. The term preference shares can therefore be misleading. The Capital Growth Company, on the other hand, was able to increase its share capital with the preference shares. No voting rights had to be given to the preference shareholders and former fund investors. Instead of a protected special fund, the private investors now held shares in a private equity company in Costa Rica. The company invested mainly in land and coffee plantations.
The company withdrew completely from Europe and the capital guarantee by the Phoenix Assurance Company in London lapsed because the corresponding premium payments were not made. The investment overseas ended in a total loss for the private investors.
Scripophily is a special field of numismatics and a collecting area due to both the beauty of some historical documents and the interesting historical context of each document.In an irregular series, the ScripoPapers aim to pick out and describe a few selected and interesting securities and the history behind them.
References to the topic
- Article with the title: “Exotenfonds: Grüße aus San José” from DER SPIEGEL 41/1972 of 01.10.1972 (website).
Pictured is a preference share of Capital Growth Company SA from 1971 with the number VPBI 07499, signed by the then president of the company Clovis W. McAlpin. The golden square rigger (sailing ship with several fully rigged masts) and the green border in guilloche technique as security printing are striking and should be mentioned on the share. In earlier times, guilloches were mainly used as a security feature when printing shares. This was done to make forgery more difficult, as the guilloches on the engraved printing plates could not be easily reproduced. The above preference share is not cancelled and is in very good condition. The coupon sheet is complete, as no dividends were ever paid out by the company.