I think this question is not exactly historical more economic. Imagine a similar situation, you buy a brand new car for £10,000. Eight years later you realise that it is no longer fit for use, and so try to sell it. Finding no buyers you scrap the clunker. Did £10,000 just disappear? No you got eight years of quality car usage for it.

Similarly those who owned stock in the Dutch East India company got dividends for the investments over the course of the 18th century (18% per year according to wikipedia - the reference on wiki is Ricklefs, M.C. (1991). A History of Modern Indonesia Since c.1300, 2nd Edition). Eventually however (and this is getting into history proper) the company's situation changed, it was no longer making profits and so could no longer pay dividends, so it was worthless.

Just as a clarification to OP: If a company is worth $X, that doesn't mean that the company has X amount of dollars. It's a result of a calculation based on many other things. There are many ways to valuate a company (e.g. total assets minus total debt, applying a multiplier to revenue generated per year, sum of cash generated throughout a company's life discounted to current period, etc.).

So if the Dutch East India company was worth $7.4 trillion, it didn't literally have $7.4 trillion worth of cash in its bank account.

Actually, there was some interesting discussion on this subreddit and on wikipedia last time this $7.4 trillion valuation came up. The source turns out to be an incorrect calculation from an article in The Atlantic. The author took the price of a VOC stock certificate sold at auction (as a historical collector's item, see her citation) as the equivalent modern-day stock value and multiplied this by the original number of shares issued. This is, of course, not the right way to compute the historical net worth of the VOC in 21st century dollars. I'm not sure what the Dutch East India company's actual value was in today's money (or how you could even compute that accurately), but I do know that $7.4 trillion is wrong.

EDIT: words

This question gets asked in /r/investment often.

"When a company's capitalization drops due to a selloff in its stock, where does the money go?"

The answer is that it literally disappears...it goes nowhere. The value investors assign to a company's stock is a measure of their confidence in that company's management and future, and the collective demand/supply forces determine the company's value (in this case, $7.4 trillion, which is basically $X per stock times Y million tradeable/restricted stocks). As people lose confidence in the company due to lack of profitability, corruption, regulatory changes and competition - which is what started happened to the VOC - more investors sell than buy the company's stock, meaning that it's worth less. Eventually, as selling picks up, the stock will capitulate and will be worth a fraction of a fraction of what it once was, rendering the company powerless to raise capital...so it goes bankrupt. That's what happens to all the major companies that eventually fail, from VOC to Kodak.

Do you have a link to the $7.4 trillion stat? There are several ways to interpret "a company is worth $X", so more context would be helpful in answering your question.

There was a post about this a while ago, but the VOC was not worth 1/1000 of that much. https://m.reddit.com/r/AskHistorians/comments/2x4ps4/til_that_the_dutch_east_india_company_was_the/

Piggyback question: As has been pointed out the VOC was not worth 7.4 trillion, and of course it's worth != cash on hand. But, what did knock out the VOC's value? I was just reading about this on Wikipedia. It sounds like for most of the 1700s they were borrowing more than they were making, but since their books were not centralized they were not initially aware of this. Then a few successive wars destroyed much of their fleet and many of their assets were captured by the British. Is that even remotely accurate?

One big problem the VOC had during the 1650-1780 period was that more money went out of Holland to the Far East instead of it coming to Holland. Perhaps this requires an explanation: the trade in Asia was based on the principle that acquiring valuable goods from Japan and China, such as porcelain and silks, was to be the main objective. The problem however with the basic principle is that these goods required silver to be purchased. Silver was in short supply in Europe, but it could be traded for in the East which in turn would allow the traders to purchase porcelain and silks.

So where did the money go? For a long period in the VOCs history, a lot of the money went east while goods went west. The conflicts with the English East India Company (who eventually came to rule over Bengal, one of the main places to acquire silver for the VOC if I'm not mistaken) further hampered the VOC's ability to return money back west as they more and more relied on money from Holland to the east. Said money was made by selling all the goods that came from the east. So there's a constant struggle between outgoing money, incoming goods and what to do with the profits. It is no wonder then that the VOC kept on borrowing money to fuel trade ventures, because the shareholders were being paid a royal dividend. Even during the worst years the VOC never considered lowering the dividend and that, in my opinion, was to be the eventual downfall of the VOC. It became a time-tested money cow and no longer was a company with unlimited potential for growth. That change gradually took place after the disastrous war with the French, English and Munster in 1672 and the eventual rise to greatness by its English counterpart nailed the coffin shut.

An accountant-turned-historian wrote an interesting yet hard to grasp book on the matter, but sadly, it is in Dutch so it might not be accessible to most of you. I say hard to grasp, as he applies his accounting knowledge to make sense of the VOC books and the things between the lines and I am not ashamed to say that I'm no accountant.

-J.P. de Korte VOC: de jaarlijkse financiele verantwoording in de VOC 2011.

One last thing then. If you care about the history of the VOC and accounting, this might be a fun link: http://executivefinance.nl/wp-content/uploads/2015/02/MCA201102031.pdf?61c751

The VOC's assets were nationalized by the Batavian Republic in 1796, and then its charter was allowed to expire in 1799. In that period, the Batavian Republic was in conflict with Great Britain, so leading to the EIC's invasion of Java; it was controlled by the EIC 1811-1815 until its fate was decided in the Anglo-Dutch treaty of 1814.

That treaty saw significant consolidation between British and Dutch possessions in the Indian Ocean theater: the Dutch gave up much of their holdings in the Indian subcontinent to focus on what today became Indonesia, the British focused on India and the Malaysian peninsula.

While it's not strictly dealing with the VOC, you might find ExtraCredit's episodes on the South Sea Company interesting. It's a somewhat similar subject and deals with some of the same questions you raised. It's episodes 17-22 on that list, by the way.

But the brief version is this: just because a company has a certain stock doesn't mean anything. It's the measurement of the investor's faith in the company and has no real connection to the actual value of the company. And, sometimes, the value of a company is inflated artificially by those who stand to gain from doing so.

ELI5: Worth is not actual money, it's just the price someone might have to pay if they wanted to buy it all at once. As time went on and the company declined, so did its value.

They spent it all on tulips!

Not exactly but they did buy an absurd amount of them

To finance Napoleons failures

Why is no one mentioning debt along side equity? The majority of the posts in this seem to never mention both parts of financing.

I'm pretty sure that the company ceased operation in 1857 in the aftermath of the Indian Mutiny when the crown took control of all their territories.