SPACs are running out of names to list

Industry:    4 months ago

The SPAC boom has led two marketing companies to battle over who gets to be called ‘System1,’ a name taken from Daniel Kahneman’s bestseller ‘Thinking, Fast and Slow’

The SPAC boom, which is now turning to bust, pitted too much money against too few company names—in one case, literally.

Following the approval last Thursday of a merger with a special-purpose acquisition company, or SPAC, led by American billionaire Bill Foley, advertising-technology firm System1 LLC is set to begin trading on the New York Stock Exchange Tuesday as System1 Inc. Its ticker will be “SST.”

As it turns out, the name is already spoken for. In September, U.K. firm System1 Group PLC—yet another ad-tech firm, this one traded on London’s Alternative Investment Market as “SYS1″—filed a complaint in a New York court for trademark infringement, unfair competition and deceptive trade practices. “Such ongoing and expanding use” of the “SYSTEM1″ mark, it said, “is likely to cause significant confusion.” A Google search returns both System1s clustered at the top of the page.

The continuing legal tussle over a seemingly mundane brand has its origins in popular science. In the 2011 bestseller “Thinking, Fast and Slow,” economics Nobel laureate Daniel Kahneman distinguishes between the “System 1″ mode of mental thought, which is fast and instinctive, from the logical “System 2″ process that takes hold later.

The first type of thinking “is rapidly spreading through the marketing industry,” the British System1 said when it changed its name from BrainJuicer in April 2017. The American System1, formerly known as OpenMail, rebranded shortly after that. In a statement, it claims the other firm has been aware of it since at least 2018 and only alleged trademark infringement after the announcement of the SPAC deal—which would perhaps constitute a bit of System 2 thinking. Still, the U.K. firm complained to the U.S. Patent and Trademark Office back in 2017.

Mr. Foley, the owner of the Vegas Golden Knights hockey team, is known for using SPACs to target financially proven businesses rather than electric vehicles, rockets and air taxis. California-based System1 is a profitable platform that acquires customers on behalf of advertisers.

Whatever sparkle his targets lack, he makes up for by giving his SPACs names of great historical battles such as Trasimene and Austerlitz. The one buying System1 is called Trebia, referencing an encounter between Rome and Carthage in 218 BC.

Is there power in a name? The quick irrational thinking described by Mr. Kahneman would suggest so.

According to 2013 research by T. Clifton Green and Russell Jame, businesses with short, easy to pronounce names perform better on the stock market. As Spencer Jakab documents in “Heads I Win, Tails I Win,” many listed firms love names with the futuristic-sounding letter “x” but end up doing quite badly. “System1″ seems neither a terrible nor a stellar name, then, though perhaps the British one retains an edge: A well-cited 2006 paper by Adam Alter and Daniel Oppenheimer suggests that the key to market outperformance is a pronounceable ticker.

Regardless, it is ironic that the name Mr. Foley has gotten into a battle over isn’t one of his SPAC ones, but that of an acquisition target. As one SPAC investor pointed out, a potential solution could be to keep “Trebia” as a name, but it might be bad from a marketing standpoint to tie the company to the deaths of tens of thousands of people.

It is an underappreciated side effect of the SPAC phenomenon: When public markets are awash with new companies, picking a cool name takes more than System 1 thinking.