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BROS, BETZ and DNA: The Race to Claim a Good Ticker and Attract Investors

Bloomberg logoBloomberg 9/16/2021 Bailey Lipschultz and Claire Ballentine

(Bloomberg) -- One of the most buzz-worthy tickers in biotech will make its return after a decade-long hiatus.

Ginkgo Bioworks Inc. is set to begin trading under the ticker DNA on Sept. 17 after completing a reverse merger with Soaring Eagle Acquisition Corp. That will mark the first time any company has traded under DNA since 2009, when Roche Holding AG bought Genentech Inc., one of the world’s first biotech firms and the original holder of the ticker.

“We could’ve chosen something that sounds like Ginkgo, but that ticker wouldn’t be memorable,” said Anna Marie Wagner, the company’s senior vice president of corporate development. “There is something so fundamental and memorable about DNA and knowing that Ginkgo stands for that core essence of biology is meaningful to us.”

For traders, tickers are like the logos of the stocks and exchange-traded funds they invest in; many refer to the products by their stock symbol in place of the company or ETF name. Amid the recent flood of retail investors rushing to buy stocks, the race to claim a “good” ticker and stand out from peers is more intense than ever before.

The question of how much a stock ticker matters in terms of generating returns hasn’t been examined very often, but securing the right combination of letters has become nothing short of an obsession in some corners of the investing world.

Ticker Philosophy

Stock tickers date back to the 1860s when Edward Calahan invented the ticker-tape machine. What began as a way to easily identify a company’s stock to execute a trade has become something of a game: creating a string of one to four or even five letters that makes an asset stand out from a sea of potential investments.

There are now 11,039 tickers in total on all the major U.S. exchanges, according to Emily Pan, a spokesperson for Nasdaq Inc. From Southwest Airlines Co.’s cute ticker, LUV, to amusement park owner Cedar Fair LP’s FUN, many companies have embraced a cheeky approach to the selection of their stock symbol. Others have a more conservative, straightforward approach, like Signet Jewelers Ltd’s SIG or Peloton Interactive Inc.’s PTON. Sometimes, additional letters signal whether a warrant or a specific share class.

A creative or pronounceable ticker may be a boon, according to some research. A 2009 study and follow-up research from 2019 show companies with clever tickers have outperformed the broader market dating back to the 1980s. By that logic, companies with unpronounceable or outright confusing tickers could be at a disadvantage. “If a ticker symbol is XGZK, it’s harder to remember,” said Clifton Green, a finance professor at Emory University. “Letters never appear like that in the English language.”

According to Daniel Oppenheimer, a professor of decision sciences and psychology at Carnegie Mellon University, people prefer information that is easy to process, what researchers call “metacognitive fluency.” Stocks with pronounceable tickers in the American Stock Exchange saw a greater than 10% difference in returns compared to those with unpronounceable tickers one day after an initial offering, according to a 2006 study he co-authored. On Wednesday, Oregon-based coffee chain Dutch Bros Inc. debuted under the ticker BROS; the stock soared 59% during trading and was one of the most-bought stocks on Fidelity’s trading platform.

Historically, single-letter tickers like M for Macy’s Inc. and F for Ford Motor Co. were especially prized for being memorable and authoritative. But now that traders frequently search Google for information about companies, single letters aren’t as advantageous. “Some of their allure is in the past,” Green said.  

Some issuers use wordplay in their tickers to describe the assets they’re selling to clients with thematic ETFs, like the Cambria Cannabis ETF (TOKE) or ETFMG Prime Cyber Security ETF (HACK). Tickers can also enable funds to more easily package their ETFs as part of a suite of offerings. Cathie Wood’s ARK Investment Management LLC currently offers eight funds, with symbols ranging from her flagship $21 billion ARKK, for ARK Innovation ETF, to the more speculative ARKX, for the ARK Space Exploration & Innovation ETF. 

“Having a good ticker is really valuable and only increases in value over time as the brand becomes the ticker itself,” said Will Hershey, chief executive officer of Roundhill Investments.

He knows from experience. Roundhill’s sports-betting ETF (BETZ) has become the go-to vehicle for investing in that industry, growing to a $400 million in assets since it launched in June 2020. Roundhill also has plans to launch a fund under the ticker MEME, taking advantage of the retail mania surrounding so-called meme stocks like GameStop Corp.

But a lack of ticker pronounceability isn’t necessarily a dealbreaker for investors. Of the best performing stocks currently in the S&P 500, many have tickers that don’t form words or really stand out from their peers. Take Monolithic Power Systems Inc. for example. Its ticker, MPWR, is nothing special, but the more than 4,200% return over the past decade trails only Tesla Inc. and Nvidia Corp. 

How to Pick

To select a stock ticker, a company has to call up the exchange it wants to list on -- for most large companies, looking to trade in the U.S. that’s the New York Stock Exchange, Nasdaq or Cboe -- and request it. 

No one legally owns a ticker; all the exchanges participate in a national system that coordinates which tickers are available and which are reserved, explained Giang Bui, head of U.S. exchange-traded products at Nasdaq. The system’s goal is to cater to potential users while also ensuring there’s no overlap of reservations.

Read More: Race for Hottest Tickers Creates Shadow Market on Wall Street

“You really have to get as creative as possible,” Bui said. “We do assist issuers with the brainstorming process and think of tickers that could work.” With a limited set of letter combinations and a growing range of assets, one answer to increase options for issuers would be allowing numbers, according to Bui, which are the norm across Asia.

If the combination of letters you’re interested in is available, you can reserve it. If it’s currently in use, you can either join a waiting list or head back to the drawing board. Once you successfully reserve a ticker, the countdown starts right away -- you have 24 months to put it to work. 

Ticker Confusion

In order to avoid confusion when a company is no longer trading, either because it goes bankrupt or is sold, exchanges will often keep a retired ticker on the sidelines for a few months or even years. After that, it goes back into the pool of available options.

In the case of DNA, the New York Stock Exchange had been holding onto the ticker since 2009, and it became a key bartering chip to getting Ginkgo to list on the exchange. NYSE declined to comment on Ginkgo’s ticker, saying it can’t discuss individual companies or stocks. “Nasdaq wasn’t able to offer us the DNA ticker symbol,” said Ginkgo’s Wagner, and NYSE was.

Zoom Technologies Inc., a Beijing-based maker of mobile phone components which previously traded under the ticker symbol ZOOM, is one example of how mistaken tickers can also cause confusion and trigger sudden swings in stock prices. When the popularity of Zoom Video Communications Inc. (ZM) soared early in the pandemic, shares of Zoom Technologies would sometimes be swept up in the rally by confused investors. Zoom Technologies ultimately changed its ticker to ZTNO in April 2020.

In another case, a tweet from Elon Musk telling followers to “ Use Signal” sparked confusion for amateur investors, leading to shares of Signal Advance Inc. (ticker SIGL) surging, despite having no association with the closely held not-for-profit organization Signal app.

“You have to pick your ticker very carefully to be clear it’s your company,” said Dan Egan, managing director of behavioral finance and investing for robo-advisor Betterment. “And if you’re a company that isn’t familiar to retail traders, you almost want to be sure your ticker isn’t similar to another company because retail traders may trade your stock in place of the more popular stock.”

Buyer Beware

The rise of Robinhood Markets Inc.’s game-like trading app as well as no-fee trading from a bevy of brokerages has driven a boom in amateur participation: the retail crowd now drives as much as a quarter of U.S. equity trading volume. Creative tickers could be more attractive to this particular segment of new investors, according to Yelena Larkin, a finance professor at York University in Toronto.

“Tickers attract attention,” Larkin said.

For Adam Quinn, a Toronto-based software developer who started investing about five years ago, a witty ticker is eye-catching. He especially likes the Canadian company Goodfood Market Corp., which trades under the ticker FOOD. Newly public companies like Coinbase Global Inc. (COIN) and Robinhood Markets Inc. (HOOD) have also made an impression, though Quinn doesn’t have an interest right now in buying them. 

“I’m still going to remember them — it’s a word, it’s so memorable,” the 31-year-old said.

Although tickers can be good marketing devices, they don’t always necessarily or even accurately communicate what the company or fund does, according to Daniel Sotiroff, an analyst for passive strategies at Morningstar.

“You need to do some due diligence and read up on what it's trying to do,”  he said. “Wade in carefully, don’t put half your retirement savings in. Just use some discretion and be careful with it.”

More stories like this are available on bloomberg.com

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