Companies must check off a few things on their checklist before they start to trade publicly on an exchange. The first is to file the proper paperwork with the Securities and Exchange Commission (SEC) including Form S-1—a requirement by any company that wants to list. Another consideration is choosing its ticker symbol, something it must submit to the exchange at least 20 days before informing shareholders.
The ticker symbol is what identifies a company, setting it apart from others that trade on the same exchange. But what happens if the ticker symbol changes? Read on to find out more about why symbols may change and what you need to do if it does.
- A ticker symbol is the grouping of a specific set of characters that represent and identify a public security listed on an exchange.
- The ticker symbol of an acquired company usually changes to the acquirer's after the completion of a merger.
- A company that changes its name may change its ticker.
- When companies are delisted from their exchanges, the symbol changes.
- Investors don't need to do anything after a ticker symbol changes.
What Is a Ticker Symbol?
A ticker symbol is the grouping of a specific set of characters, usually letters, that represent and identify any type of public security that trades on an exchange. Symbols are unique, allowing investors to research and trade shares in the companies they represent.
Every security that is listed has a ticker symbol, which is chosen by the company before it lists on an exchange. Although the symbol may be an abbreviation or other equivalent of the company's name, this isn't a requirement.
The ticker symbol system was created and standardized by Standard & Poor's (S&P) and is used by every major exchange in the world. Companies that trade on the New York Stock Exchange (NYSE) have ticker symbols with three letters, while those listed on the Nasdaq have four letters.
My Ticker Changed!
Ticker symbols help investors identify companies when they're doing research or making trades. But, like everything else, these symbols aren't always static. They can change for several different reasons:
- The company merges with another corporation
- The company changes its name
- The company delists from its exchange
Ticker symbols aren't static and can change in the event of a merger, name change, or delisting.
Mergers take place when once company acquires another one. Since they combine to form one new entity, they can't both trade on the exchange. So what happens to the two ticker symbols? When two companies merge, the entity being acquired usually gives up its ticker symbol in favor of the acquiring company's symbol. Corporate actions such as mergers can often be positive for a company, especially if the company is taken over for a premium over the share price.
A ticker symbol may change because the company changes its name. A company name change generally doesn't mean much to its operations, though investors may interpret it as positive sign if it reflects a positive change in the company's overall strategy. Here's an example. When AOL Time Warner dropped the AOL and became simply Time Warner, it changed its symbol from AOL to TWX.
If a ticker symbol has letters added to it such as .PK, .OB or .OTCBB, this means the stock is delisted. No longer trading on the original exchange, it's on the less liquid and more volatile over-the-counter market. More specifically, a .PK indicates that your stock now trades on the pink sheets, while .OB or .OTCBB represents the over-the-counter bulletin board.
A stock that has been delisted is like a baseball player sent from the major leagues to the minors. For some reason, the stock is no longer worthy of trading on a major exchange, perhaps because it failed to maintain the exchange's requirements.
Most companies that are listed on the Nasdaq have four-letter ticker symbols. But there are instances when the exchange adds a fifth letter. This letter tells investors something important about the company. Two of these letters are no longer used. For companies that entered bankruptcy proceedings, had a "Q" added to the end of the ticker. It also made changes when companies were delinquent with their SEC filings by adding an "E" to the end. The Nasdaq ended this practice in January 2016, and now uses the Financial Status Indicator to denote delinquent regulatory filings or bankruptcy proceedings.
What to Do if Your Stock's Ticker Changes
A ticker symbol change really means nothing to you, the investor, in the grand scheme of things. The change doesn't do anything to markets or to the way you execute trades. Since everything is electronic, your trading platform or broker will already update your portfolio to include the new ticker symbol.