How Do Companies Get Their Stock Symbols?

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A company does a lot to protect its brand. It market-tests new logos, focus-groups slogans, and runs every new product name through a hundred different tests to make sure that it stays in line with the company's image. Part of that brand is a company's stock symbol. A company's stock symbol can be as simple as a single letter, can be representative of an ideal, or can celebrate a favorite product. But in most cases, it's a vaguely recognizable collection of characters used for the sake of utility. "¨"¨

Where to List Yourself"¨"¨

The first question that a company asks is not what it wants its stock symbol to be, but rather where. The three major exchanges in the United States are the New York Stock Exchange (NYSE), American Stock Exchange (AMEX), and the National Association of Securities Dealers Automated Quotations (NASDAQ). Each exchange has its own listing requirements and costs. By far, the NYSE has the most stringent listing requirements, insisting that its listed companies have at least $100 million in capitalization and that their stock prices start above $4 per share.

The NASDAQ has slightly lighter requirements and thereby became the preferred exchange for new companies and start-ups. The AMEX was recently bought out by the NYSE but still lists companies independently with much lower stock prices and market caps.

How Many Letters Do You Want?

Traditionally, stocks listed on the NYSE and AMEX could only contain one, two or three letters, while companies listed on the NASDAQ always had four letters to their symbol.  In 2007, however, this rule changed to allow companies to move freely from the NYSE to the NASDAQ. Prior to 2007, a company like E*TRADE Financial had to change its symbol when it moved, going from ET on the NYSE, to its current symbol of ETFC on the NASDAQ. After 2007, a company like Computer Associates (CA) was able to move seamlessly from NYSE to NASDAQ without making a change.

The Power of One

You'd think that the one-letter symbols would be the most highly sought after. Really, what company wouldn't jump at the chance to have a sexy, single-letter symbol summing up its whole financial being? Apparently, one-letter symbols aren't all that exciting anymore. Yet they used to be all the rage.

Just following the Civil War, Thomas Edison invented the ticker tape machine, which sped news about stock transactions all over the country. To speed up transmissions, some of the most frequently traded companies were given single letter abbreviations -- "A" for the Atchison-Topeka-Santa Fe Railroad, "X" for US Steel. 

These days, some of the older companies treasure their single-letter status -- AT&T (T), Sprint Nextel (S), Kellogg (K), and Ford (F) -- yet there are a surprising number of letters open, specifically H, I, J, P, U, W, and Z. Come on entrepreneurs, name your new company Harry's Hot Dogs or Willy's Wieners and snatch up one of these iconic symbols.

Sometimes You Change the Symbol, Sometimes the Symbol Changes You

Choosing the right symbol can be a tricky business. Some are no-brainers -- General Motors (GM), General Electric (GE), Home Depot (HD) -- while others go for a more clever approach.  Before being bought out by the Belgians, Anheiser-Busch went by "BUD." Brinker Intl., franchisers of Chili's and Macaroni Grill restaurants has the coveted "EAT" symbol. Dreyfus, whose mascot is the lion, uses the "LEO" symbol for one of its closed-end funds.
 
yum.jpgOne of the most interesting symbols out there is "YUM." In 2002 Tricon Global Inc., a company with a most nefarious sounding name, was one of the largest restaurateurs in the world. Tricon owned KFC, Taco Bell and Pizza Hut. However, the name "Tricon Global Inc." didn't exactly conjure up thoughts of finger-licking, carefully prepared food.  Rather, the name sounded like some faceless, evil corporate conglomerate that would consume the children of its competitors and have a dungeon below its corporate headquarters. To seem a little more warm and fuzzy, Tricon changed the company name to Yum! Brands, echoing the down-home, good-time, string-tie-and-white-suit image that they were trying to project.

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May 3, 2009 - 7:30pm
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