Unveiling the Mystery: How are Stock Ticker Symbols Assigned?

Every well-known stock symbol, whether it is MSFT for Microsoft or SWAK for

Southwest Airlines, sparks curiosity about the origins behind them. After an initial foray into the world of IPOs (Initial Public Offerings), companies often choose ticker symbols that reflect their brand or industry. Yet, many are not just straightforward abbreviations, but instead, whimsical or memorable identifiers that add nuance to the investment equation.

The Evolution of Ticker Symbols

In the past, ticker symbols were of paramount importance, akin to vanity license plates for companies, serving as a point of pride and a way to brand their identity. The process of assigning these symbols was often a carefully considered decision. Today, while their significance has diminished, the symbols continue to serve as a form of branding and a quirky connection to the company's legacy.

Common Abbreviation and Mnemonic Techniques

The most common approach is to go with abbreviations that capture the essence of the company name succinctly. For example, Microsoft gets to use MSFT, while Caterpillar is known by CAT. Even Minnesota Mining and Manufacturing has the MMM ticker, with 3M being the more recognized brand name. These abbreviations make it easy for traders and investors to recall the companies they are dealing with.

Whimsical and Memorable Tickers

Yet, some companies have taken their tickers to a creative level, often resulting in memorable and unique identifiers that align with their branding. Texas-based Southwest Airlines chose LUV as their ticker symbol, a nod to the brand's playful and fun-loving culture. In the 1970s, Southwest embraced their Texas roots, making a bold fashion statement by having flight attendants wear orange hot shorts, and being based out of Love Field in Dallas. The name LUV both stood for "love" and the love connection between the company and their passengers.

Other companies have chosen symbols that have a direct tie to their product or service. Take Avis for example, which chose CAR as their ticker symbol to represent their car rental business. Sotheby's auction house uses BID, a nod to the bidding process at auctions. Schlotzsky's, another Texas-based sandwich chain, opted for BUNZ, an abbreviation that hints at their specialty in sandwiches, if not in the culinary arts themselves. Similarly, Constellation, the wine and beer giant, chose STZ for Starz, a clever reference to their star product. The symbol isn't as straightforward as it could be, but it captures the brand's essence and provides a memorable link for investors.

Less Obvious Ticker Symbols

Certain companies, however, have chosen symbols that seem more obscure. For instance, Nordstrom's is listed as JWN, a clever mnemonic that might initially leave some investors scratching their heads. Domtar goes even further with UFS, a bewildering symbol with no apparent connection to the company's name or product. These choices can make for fun trivia, but they often serve as a quirky personal touch for founders, board members, or executives who share a deep emotional connection with the company's founding.

Registration and Merger Factors

Another factor that influences the ticker symbol is the process of registering a stock for trading. Companies often pay a considerable sum to list their stock, which makes it valuable to have a unique and memorable ticker. When companies merge, old symbols can stick around even if they make little sense anymore. For example, US Steel, despite its merger, still uses the ticker X, while ATT retains T. Some companies have names that seem arbitrary compared to what they commonly go by, like JWN for Nordstrom's, which is based on the original company name JW Nordstrom.

Conclusion

While the stock ticker symbol once held significant importance, its role has diminished over time. However, the process of assigning these symbols remains a blend of practicality and creativity. Companies often choose symbols that reflect their brand identity or reference their products, making them memorable and meaningful to their stakeholders. For some obscure companies, getting a unique and witty ticker symbol can work to their advantage, providing a talking point and a bit of free publicity in an increasingly digital world.