Woolly sneaker maker Allbirds renamed itself NewBird AI in April, and its shares surged 580%. In June it became Smartbird, which sparked another bounce. The stock is now down 85% from its April jump. Spencer Jakab’s Markets column asks when a new name should worry shareholders — and it turns out the label matters less than what’s underneath.
What the research found
Quantitative analyst Alexander Hübbert studied companies that changed names for reasons unrelated to a deal. On average, they lagged similar companies by more than 5 percentage points the following year. But Hübbert says the name change alone means nothing. Essentially the whole gap came from companies losing money at the time, which trailed their peers by more than 13 points.
Jakab’s explanation is refreshingly human: a board struggling to fix real problems might prefer a cosmetic change to more painful choices. As an illustration, lagging peers by 13 percentage points on a $10,000 position means $1,300 of ground lost to them in a single year.
Reading past the label
Rebrands meant to shed a past are a mixed bag. Altria (MO), formerly Philip Morris, still mostly sells cigarettes, yet buying at its 2003 rename would have earned nearly 3,000% — more than twice the S&P 500’s total return. Valeant Pharmaceuticals, a name picked to leave ICN Pharmaceuticals’ troubles behind, became Bausch Health (BHC) in 2018. It’s down by two-thirds since.
Enron nearly launched as Enteron, until a last-minute encyclopedia check showed the word also names part of the intestine. The clever name couldn’t prevent what came later: accounting fraud and what was then the largest U.S. bankruptcy.
So treat a name as packaging. Hübbert stresses his finding isn’t a trading strategy, but it’s a fine reason to open the financials. Is the company profitable? Is the new name shamelessly copying the hot theme? Umbrellas get tested before the storm, not during it — fifteen minutes with your latest statement can show which holdings sell a name instead of a business.