Changes of a corporate name should cause the investor to immediately review his ownership in a stock. Often, the change is part of a corporate redefinition of its mission or an attempt to strengthen its brand. However, the name change, particularly if accompanied by a change in the stock's ticker symbol, usually implies that a substantive issue affecting the stock price has already occurred. All publicly traded stocks employ a stock transfer agent, usually a bank trust department, which actually effects the management decision to change the company name and notifies stockholders of the change.
Stock Redefinition
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Over time, as a company changes its sales emphasis, the enterprise may attempt to freshen its image by changing the name of the company to better reflect what products and services it produces. For example, when International Totalizer stopped making just cash machines and produced many different business machines, it changed its name to International Business Machines. As the company became best known for computer leadership, it became IBM. No practical effect occurred to the stock or its listing. Old stock certificates were honored as the stock transfer agent records were automatically updated.
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Stock Held in Broker Name
If the stock is not registered in the investor's name the stock is held in 'street name.' Street name refers to the brokerage house through which the stock was purchased. It is the brokerage firm's responsibility to notify the investor of name changes. This also applies to the investor who is the beneficiary of a trust, grant or inherited stock. Review brokerage statements regularly for notifications of name changes. Note that neither a corporate bankruptcy nor a stock delisting (removal from trading on a stock exchange) is a name change. The stock will trade under a different symbol and may no longer be a available for public trading.
Corporate Acquisitions
Name changes are common after a company has been acquired. The stockholder may receive notice that the company has been purchased for cash, an exchange of stock or both. The old company name may have been eliminated but may continue to exist as a division of the purchaser. Investors should be concerned if they first find out about a corporate takeover through a name change notification. By then, the purchase transaction will be completed and any outstanding stock may not be easily marketable or exchanged for stock in the acquiring company. If the purchase of the company was for cash, the investor may receive a check for the stock purchase. Tax consequences may follow.
Further Considerations
If the stock changes its name, some immediate actions should be taken. Contact the broker from whom the stock was purchased or the brokerage house that sent the notice and confirm the value of your investment. There are several other reasons for name changes. One company may combine with another company and choose a new name, or a company may split itself into its many divisions as AT&T did, generating stockholder ownership in the parent company and each of the regional telephone services. Occasionally, stocks take successful divisions within the company public. The investor then receives shares of the new company.