Meta shares jump on name-change news — but it's a Canadian materials company, not Facebook

Shares in a relatively small Canadian materials company have been surging after some misguided investors apparently thought they were getting a deal on buying stock in the world's largest social media company.

Shares in Nova Scotia based Meta Materials gained 26 per cent in after-hours trading on the Nasdaq Thursday, after Facebook Inc. announced it would be changing its name to Meta. 

More than 12 million shares in the Canadian company with the ticker symbol MMAT changed hands during the trading session. That's more than double the usual daily volume.

Facebook shares trade under the symbol FB but in December, in keeping with the company's name change focusing on the metaverse, they will change their ticker symbol to MVRS.

The Canadian company is just the latest to become a beneficiary of a specific type of mistaken identity — one that sees investors pour money into one stock because they think it's another.

In a research paper published by Rutgers University in 2019, Professor Vadim Balashov and co-author Andrei Nikiforov catalogued 254 instances of companies that saw fluctuations in their stock price related to events at another company that either had a similar name, or a similar stock ticker.

"It happens more often than we think," Balashov said in an interview with CBC News. "Something happens with a big company, and then there will be a reaction in the small company [but] nothing actually happens with the small company. It's investors just buying and selling the wrong stocks."

There's a long list of companies who have had something similar happen to them. In 2013, when Twitter announces plans to go public, shares in a dormant electronics retailer called Tweeter Home Entertainment Group, Inc. spiked 1,400 per cent.

The phenomenon happens both ways. Balashov says in 2007 Graco Children's Products Inc. announced a recall of some baby toys. Shares in an unrelated fluid-handling systems manufacturer named Graco Inc. fell six per cent at one point that day. "People were selling the wrong stock, so that does happen as well."

More recently, Zoom Technologies, which makes electronic-communication products for mobile phones, jumped at the height of the pandemic when the world flocked to the similarly named video conferencing service.

And in December 2020, food delivery service DoorDash went public in an IPO. The same day, shares in a Florida door-making company with the ticker symbol of DOOR spiked.

Balashov's research says it's not just ill-informed retail investors who get their wires crossed — the smart money at major institutions also make those mistakes all the time.

"Portfolio managers [at] mutual funds, hedge funds — they're still people," he said.

Even high-frequency trading algorithms participate, since some are programmed to buy shares that are moving in a certain way, regardless of what the underlying business is. So when algorithms "read" news and make trades based on stories they screen,"They also make mistakes, they also confuse companies," Balashov says. "We've seen that," he said.