Facebook Changed Name, Now Changing Ticker. What It Means for the Stock.

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Meta Platforms
,
formerly known as

Facebook
,
is taking the final step to decisively shed its previous identity on Thursday.

The company will begin trading under ticker symbol “META,” leaving behind its current trading symbol of “FB,” which has been in use since the company’s initial public offering in 2012.

There’s a few reasons companies change their ticker symbols, including merger and acquisition activity, delistings, and name changes. Meta, for instance, said the new ticker aligned with the company’s rebranding from Facebook to Meta, announced last October.

For many executives, a ticker and name change can be a way to enhance the appeal of a stock. Indeed, studies have found that people are more likely to purchase stocks with easily pronounced and memorable ticker symbols.

While the ticker change won’t mean much for people currently holding the stock—who will automatically see the update on their trading platforms—history suggests that changing a ticker could create confusion in the immediate aftermath.

In a 2006 study of 171 ticker changes, researchers found that there was a “significant reduction in trading volume” and a decline in stock prices on the day a pure ticker change went into effect, as well as on the following day. The drops weren’t reversed in the subsequent five days, with some persisting over a decade, the University of Texas at San Antonio researchers found. They attributed the decline to investors being ill-informed about the change.

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Although information is more readily available to investors now, a ticker change can still alter trading volumes. For example, among seven companies that changed their tickers in 2022, five saw trading volumes were below their 30-day average on the day of the change, according to Dow Jones Market Data. This includes well-known names such as

Paramount Global

(

PARAA

) and

Shell PLC

(SHEL).

When it comes to stock prices in the long run, however, the relationship is much less clear. Even with a ticker change, stock prices are still largely determined by a host of external reasons, from a company’s performance to the macroeconomic environment. Take Shell. The stock gained 0.6% in the month after changing its ticker on Jan. 31, outperforming the

S&P 500
,
which lost 1.5% during that same period. Oil stocks started to tick up in February as tensions brewed between Russia and Ukraine.

Warner Bros. Discovery, however, was down 32% a month after changing its ticker on April 11, while the S&P 500 was down 12.3%. Within that month, investor fears on the future of streaming services heightened following

Netflix
’s
(NFLX) subscriber stumble.

In short, Meta’s ticker change might not be the defining factor influencing the stock price. But it would serve investors well to remember to trade under the right ticker come June 9.

Write to Sabrina Escobar at [email protected]