While this subject may seem trivial to some, the fact is that companies
spend thousands or even millions of dollars in changing their name. And,
at least one empirical study shows that name changes which are
distinctive, or are more functional than the original name, have a
positive effect on stock prices.[1]
Peter Lynch, one of the most successful stock pickers in recent years
and the former portfolio manager for Fidelity's Magellan mutual fund,
offers advice on corporate name changes. In his bestselling book, One Up on Wall Street Lynch included a list of
characteristics of the perfect stock, the first of which is "It sounds
dull-or even better, ridiculous." The mutual fund mogul writes:
Pep Boys--Manny, Moe and Jack is the most promising name I've ever
heard. It's better than dull, its ridiculous. Who wants to put money
into a company that sounds like the Three Stooges? What Wall Street
analyst or portfolio manager in his right mind would recommend a stock
called Pep Boys-Manny, Moe and Jack-unless of course the Street already
realizes how profitable it is, and by then it's up tenfold already. (p.
122)
However, if you are voting on the company's name change, you already
own it, and management may have already spent vast sums on the name
selection process. Therefore, it is probably better to vote for the
proposed name change before management goes back to the drawing board and
spends another small fortune attempting again to change the
name.
