Just days after announcing a sweeping settlement of sexual harassment and workplace misconduct claims, L Brands’ Bath and Body Works and Victoria’s Secret were split into two distinct, publicly-traded entities on Tuesday, and the lingerie-maker’s shares rose 27 percent in their stock market debut as a stand-alone company in furtherance of what Morgan Stanley analysts are predicting will be a “credible turnaround story” following years of declining sales and reputation-tarnishing events. The split does away with the formerly public L Brands, and puts BBWI and VSCO, which are the individual companies’ respective tickers (i.e., the symbols used to uniquely identify the publicly traded shares of the companies), in its place on the New York Stock Exchange.
Aside from the potential for a successful turnaround of Victoria’s Secret, complete with a revamp of its ad campaigns and its offerings to skew more towards the needs of modern female consumers and away from the hyper-sexualized ethos of the traditionally male-run company, Victoria’s Secret’s new structure is interesting in another respect: its NYSE ticker symbol – VSCO, which is not only seemingly short for Victoria’s Secret & Co., but it is also the name of privately-held Visual Supply Company’s 10-year-old iOS and Android photo app.
Is the naming commonality likely to give rise to legal issues? Probably not. The selection of such tickers is generally “self-regulated by the National Market System Plan for the Selection and Reservation of Securities Symbols, which is approved by the U.S. Securities and Exchange Commission” (“SEC”), and provides “a first-to-claim ticker allocation procedure, with very little regulation on disputes, and no mention of prior intellectual property rights,” according to Holland & Knight LLP’s Thomas Brooke and Bermeo Law’s Rodrigo Bermeo-Andrade. Ultimately, the SEC gives companies reasonable discretion when picking stock ticker symbols, requiring only that “each ticker symbol be original (i.e., not copy another company’s stock ticker symbol) and appropriate.”
Those boxes are checked in the situation at hand.
But what happens when a company’s ticker makes use of another active company’s name? “Ticker symbols are typically used in a nominative sense, to identify a company with an abbreviation of its legal name or of a trade name, rather than to indicate the company as a source of goods and services,” Stradley Ronon Stevens & Young attorney Kevin Casey asserts. With that in mind, “A stock ticker symbol does not function as a trademark for that company’s goods and services,” and so, “courts have traditionally not permitted companies to trademark their ticker symbols as such.”
Beyond that, Brooke and Bermeo-Andrade note that “courts have held that investors are generally sophisticated customers that conduct proper due diligence before buying into a company.” That does not mean, however, that conflicts cannot – and do not – arise if a company’s stock ticker symbol is confusingly similar to another company’s brand paired with other elements, as well, such as a similarity of goods or services, for example.
In a case that played out decades ago, the maker of BIC pens filed suit seeking to enjoin the unrelated Beisinger Industries Corp. from using BIC as its ticker symbol on a stock market in New York. The pen-maker argued that the BIC ticker symbol infringed its trademark, and the court agreed, issuing a preliminary injunction against Beisinger’s adoption of the mark on the basis that its use of BIC as a ticker symbol could give rise to a likelihood of confusion among investor consumers.
Much more recently, the SEC took action in connection with two confusingly similar tickers, halting trading in the shares of Beijing-headquartered Zoom Technologies – whose ticker symbol is “ZOOM” – in March 2020, citing “concerns about investors confusing this issuer with a similarly named Nasdaq-listed issuer.” The other issuer? Zoom Video Communications (ticker symbol: ZM), the company behind the widely-used remote meeting services platform. “Thanks to ticker confusion, shares of ZOOM shot through the roof” in the immediate wake of initial working-from-home announcements (and the subsequent and widespread adoption of the Zoom’s services by companies across the globe), financial publication The Street reported on March 31, 2020. “They are up nearly 900 percent year-to-date after being up as much as 2500 percent a couple weeks ago.” (Trading resumed for the “other” Zoom on April 9.)
Fortune noted at the time that Zoom gate is “not the first time investors have bought the wrong stock after mixing up its ticker symbol with that of a more high-profile company, particularly during volatile market events, such as initial public offerings.” In 2017, during the run-up to the highly anticipated initial public offering (“IPO”) of Snapchat-owner Snap Inc., “Investors bid up shares of [the unrelated] Snap Interactive before Snap Inc. even went public,” seemingly prompting “Snap Interactive to ultimately change its name to PeerStream a year after the Snapchat maker’s IPO.”
Hard to Get Handles
Chances are, investors are unlikely to confuse Victoria’s Secret’s new ticker with the not-publicly-traded Visual Supply Company – and that remains true even if they are familiar with the “VSCO girl” meme/trend that saturated social media a couple of years ago. (For the uninitiated, VSCO girl refers to those who, as the Independent’s Chelsea Ritschel put it in November 2019, “dress and act in a way that is nearly indistinguishable from one another,” and are usually outfitted in oversized T-shirts, scrunchies, Crocs, friendship bracelets, Birkenstocks, shell necklaces, and other beach-related fashion.”)
Confusion or not, the VSCO vs. VSCO, Zoom vs. ZM, and Snap Inc. vs. Snap Interactive instances, among others, are all interesting, nonetheless, as they represent how the SEC’s first-to-file ticker system could “quickly lead to confusion,” per Brooke and Bermeo-Andrade. These situations are also striking, as they come as new brands and/or sub-brands of all sorts are consistently running into existing and similarly-named entities when they come to market (or more ideally, before they come to market), and routinely having to get creative in order to adopt names that enable them to different themselves – and their products and services – from those of others, and to nab the corresponding social media handles and domain names in the process, which are very valuable assets in the digitially-connected marketplace.
Given that the number of IPOs has been growing, with the number of new offerings in 2020 having increased by nearly 100 percent year-over-year to 407, up from just 195 in 2019, and with plenty in the pipeline for this year – from Rent the Runway to Authentic Brands Group, Casey encourages companies that are in the processing of choosing a ticker symbol, “particularly when the symbol does not reflect the company’s own name or brand,” to carefully “consider the trademark rights of others.” After all, taking a “proactive approach can avoid the cost – and embarrassment – of having to go public twice.”
And as for Victoria’s Secret and VSCO, the stalwart lingerie retailer could certainly benefit from the likes of TikTok-glued VSCO girls, which are the very audience (i.e., Gen-Zers) that it has largely failed to attract, thereby, forcing it give up market share to younger brands like ThirdLove, Adore Me, and Rihanna’s Savage X Fenty, among others, which have catered to younger consumers by way of their female-focused advertising, modern undergarment offerings, and wider array of sizes, all of which VS has been slow to adopt. It is now seeking to makeup for lost time, one wire-less bralette and “Angel”-less ad campaign at a time.