Securities can be issued in two ways: registered, or bearer. These days, most are issued as registered, meaning that the business that sells the security keeps track of it.
With the bearer form though, there is no record of who owns the security, and whoever has the certificate in hand is assumed to be the owner and entitled to the payments on said security. The bearer share is an equity security issued in this way: the business who issued it holds no record of it. The company pays dividends to whoever presents the certificate. As you may imagine, this leaves a lot of room for conflict over who is claiming the share, which may be partially why this practice is dwindling.
The incentive here is that transfer tax may not apply (because the transfer is not recorded). The downside is that the share can be lost if you lose the certificate, which stands as proof.
Picture inheriting from a great-grandparent. The bearer share might simply be a certificate in a lockbox to be sorted out...whenever someone gets to it. You might benefit with the lack of extra tax, but then again, if you have a shifty cousin that gets to the box first, they could take your certificates and you would have a hard time proving it.
Related or Semi-related Video
Finance: What is a Bearer Bond, or Beare...20 Views
Finance a la shmoop... what is a bearer bond or bearer stock alright you know
that saying possession is nine-tenths of the law
right well that's how bearer bonds and stocks work if you have the paper [Man presenting a bond]
representing the bond or stock aka the bond or stock certificate itself in your
hot little hands or wallet well then you own the bond or stock whether you stole
it or bought it or you know 3D printed it...In bearer bonds and
stocks there's no record or tracing of who bought or owned the bond or stock
sort of the opposite of how Bitcoin works and because of this non tracing [Money in a laundry machine]
and the ease with which money could be laundered for our kindly loving
terrorist friends bearer bonds and stocks are not very common today because
investors simply don't like the idea that their precious assets can be stolen [Thief running from police with money]
and then used to you know match plaid with stripes to counter this anonymity
most securities are in fact registered meaning that ownership is filed
officially with a brokerage or an issuer ie the company itself so that money can [A tracker appears]
be tracked and well taxed all over the world and note that one way bearer bonds
or stocks are dealt with in the fashion realm is to you know simply get rid of
the E don't look....[Man walking on a catwalk with no clothes]
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