The following information was provided by Heritage Rare Coin Galleries in an April 4, 2001 press release to announce the discovery of this rare and important variety. Since then, additional examples have been found:
"Christian Gobrecht's original obverse hub for the Seated Liberty half dollar was used from 1839 through early 1842; later in 1842, the Medium Date hub came into use.
The original reverse design of the Seated Liberty half dollar featured small letters in the legend UNITED STATES OF AMERICA and in the denomination HALF DOL. Prior to the discovery of the present example, this reverse design had been identified on all 1839 Seated Liberty, 1840 (P), 1840-O, 1841, and 1841-O half dollars, as well as on some 1842-O examples. Now, an 1842-dated example from the Philadelphia Mint has been discovered.Coinfacts.com
As alluded to above, 1842 was a transitional year for the Seated Liberty half dollar. The Mint jettisoned the Small Date obverse hub in favor of a Medium Date design, and the Small Letters reverse was also used for the last time. There are two varieties of the 1842-O half dollar, the Small Date, Small Letters variety, and the Medium Date, Large Letters variety. With a mintage of only 203,000 pieces, the former variety has long been heralded as a key issue in this long-lived series.Coinfacts.com
If one were to look at Guide Books dated prior to 1999, they would see that the Philadelphia Mint's delivery of half dollars in 1842 was divided between Small Date and Medium Date examples, all of which displayed Large Letters reverses. The 2000 Guide Book was the first to list the much rarer 1842 Small Date, Small Letters variety. This variety is still unpriced in all grades in the Guide Book-the only Seated half dollar with this distinction.
The identification of the present coin indicates that the New Orleans Mint was not the only coinage facility that used the Small Letters reverse for its 1842 half dollar production. The Philadelphia Mint also used at least one reverse die with this design to produce an unknown, although seemingly limited number of Small Date, Small Letters half dollars in 1842. To date, this coin is the only known example of this newly discovered variety. Walter Breen did not mention the 1842 Small Date, Small Letters half dollar in his 1988 Encyclopedia, and this variety was also unknown to Randy Wiley and Bill Bugert when they published their book The Complete Guide to Liberty Seated Half Dollars in 1993. It is interesting to note that the reverse die used to produce this coin has not been identified as being used with any other obverse die in the Seated Liberty half dollar series."