Ticker symbols are the abbreviations we use to identify the stock for a specific company. Investors who follow along with the financial news often know the companies more by their ticker symbol than their actual names. No two stocks that trade on the same exchange can have the same ticker symbol.
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How Ticker Symbols Got Their Name
Ticker symbols were printed on the paper strip that emerged from a ticker tape machine. This is the earliest known dedicated medium for communicating financial news like stock prices.
The ticker tape machine was invented by Thomas Edison in the mid-1800s and was used until 1970. It is the first iteration of our modern-day stock ticker that is now entirely digital.
You read that right, there are some rules on how to decide on a ticker symbol.
If the company trades on the New York Stock Exchange, the stock symbol can be four letters or less.
If they trade on the NASDAQ exchange they can be up to five letters or less.
Why the discrepancy? There is probably a reason for it but in all honesty, it’s not important. There is nothing significant about a stock’s symbol other than being used as a unique identifier.
Other stock exchanges around the world have their own sets of rules. The Toronto Stock Exchange in Canada has similar rules to the US exchanges.
In 2016, Canadian eCommerce giant Shopify (NYSE: SHOP) became the first Canadian stock on the TSX to trade with a four-letter ticker symbol. Stocks that are dual-listed in Canada and the US generally use the same ticker symbol on each exchange.
In Asia, markets like the Nikkei in Japan and the Hong Kong Stock Exchange use numbers as ticker symbols. If you think abbreviations are difficult, try figuring out the company with just a four-digit number. Obviously, these stocks don’t have the same symbols as their ADR counterparts that trade in the US.
Why Do Some Stocks Have Different Classes?
You might notice that some companies have several different versions of their stock. A great example of this is Alphabet (NASDAQ: GOOGL) which has the GOOGL Class A shares and GOOG Class C shares. Warren Buffett’s Berkshire Hathaway has the same structure as it has the BRK.A shares and BRK.B shares. What gives?
These are the shares that are most commonly bought by retail investors. Class A Shares are also known as common stock, which provides some sort of voting structure for shareholders. Holders of these shares can participate in various governance votes as outsiders to the company.
These are more rare. Although Berkshire Hathaway does have them. Class B Shares have lower dividend priority and generally fewer voting rights. This always depends on the company and how they want to differentiate between the two types of shares.
Similar to the other two types of shares but Class C shares often come with no voting rights at all. Because of this, they can trade at a slight discount to Class A shares.
Is there an advantage to owning any of these specific types of shares? For a majority of companies, we will own the Class A shares of the stock.
But just in case you were curious as to why Alphabet and Berkshire Hathaway have different stocks with different stock symbols, now you know!
Other Anomalies
You would be surprised as to how many different symbol prefixes and suffixes there are.
A quick glance at the US ticker symbol rules shows that there is a use for nearly every letter of the alphabet!
For example, a U after the ticker symbol denotes that these are Units of a stock.
The letter Y following the ticker symbol indicates it is an ADR or American Depository Receipt. These stocks are international companies that trade on the US markets.
On the New York Stock Exchange, there are currently 21 different single-letter ticker symbols. The letters ‘I’, ‘N’, ‘P’, ‘Q’, and ‘Z’ are not utilized as of yet although Zillow does use the ticker ‘Z’ on the NASDAQ exchange.
Can Ticker Symbols Change?
If a company name changes or if it merges with another company, the stock symbol can definitely change. Perhaps the most publicized recent change will be for the company formerly known as Facebook. Under its new name Meta Platforms, the ticker symbol will change from the familiar FB to META. This is a play on the Metaverse and what seems to be the company’s new direction.
Another example is when former phone maker BlackBerry (NYSE: BB) changed its name from Research in Motion where it traded under the ticker symbol RIM.
Another major reason why ticker symbols change has been SPAC stocks. SPAC stands for Special Purpose Acquisition Company and is essentially a shell company that brings a private company public.
While the SPAC stock trades under a certain symbol until the merger, after the merger the stock will take on the symbol for the newly formed company.
EV-maker Lucid (NASDAQ: LCID) traded under the symbol CCIV after its SPAC, Churchill Capital. When the two entities merged, Lucid began to trade on the NASDAQ under its current symbol LCID.
What Are the Best Ticker Symbols?
Of course, this is all up to personal preference. As I already mentioned there is no real meaning or attribute for a ticker symbol. It is simply an identifier, a shorthand for referring to a company’s stock and not the company itself.
You can completely disagree with these choices and it really won’t matter. These are some that I find are creative and better than just an abbreviation of the company’s name.
Salesforce.com (NYSE: CRM)
I’ll wager that a lot of people don’t even know what CRM stands for. This must mean a lot of people also don’t understand why Salesforce.com’s ticker symbol is CRM.
In this instance, CRM stands for Customer Relationship Management. This is a type of enterprise technology that manages your relationships and interactions with your clients. It tends to use things like data analytics to improve your business relationships.
Petco (NASDAQ: WOOF)
This one is pretty self-explanatory, isn’t it? PetCo is back on the public markets and it secured one of the best ticker symbols around. Do I like the stock? Not really, but do I ever love the stock symbol! If only there was a cat company that chose the ticker symbol MEOW.
C3.AI (NYSE: AI)
I know AI is in the company name, but how cool is it that an AI company managed to get the ticker symbol AI. C3.AI is an artificial intelligence company that is looking to automate enterprise solutions. The platform makes over 1.7 billion predictions every day that help businesses make decisions and streamline their efficiency.
Harley Davidson (NYSE: HOG)
This classic motorcycle company managed to scoop up the ticker symbol HOG. It is a perfect representation of the company, and while I have no interest in buying the stock, I can appreciate Harley Davidson’s ticker symbol every time I see it.
Gingko Bioworks (NYSE: DNA)
Another fitting ticker symbol, Gingko Bioworks is a biotech company with a twist. It uses genetic engineering to create bacteria which it then uses in industrial applications. When I first saw that it had the ticker symbol DNA, I assumed it was a genomics company. Still, Gingko Bioworks does use genetic testing so it is appropriate.
Do Cryptocurrencies Have Ticker Symbols?
Yes! An interesting thing about cryptocurrencies is that most projects have a blockchain and a token. These usually have separate names for each part. For example, Cardano is the blockchain and ADA is the tokens. Terra is the blockchain and Luna is the tokens. Even Ethereum is often mislabelled. Ethereum is the blockchain protocol, while the tokens you invest in are called Eth or Ether.
Conclusion
As you can tell, ticker symbols are kind of a fun part of the investing world. They hold no significance other than being identifiers for a particular stock. I always find it funny that investors know stock ticker symbols more than the actual company names. But if you think about it, the ticker symbol is then fulfilling its intended role.
A great majority of ticker symbols are abbreviated versions of the company’s name. Once in a while, you find one that is creative and not indicative of the company name at all! Another cool thing about ticker symbols is that each stock market around the world has its own set of rules. Even though they are completely arbitrary, ticker symbols are the main way that we identify stocks.
