What is a champagne stock? Definition and meaning
In finance, a champagne stock is one that has significantly increased in value over a relatively short period – usually at least doubling or tripling in value.
They are called ‘champagne stocks’ because their owners, who made lots of money in a short time, typically go out and celebrate their success with expensive champagne.
An example of a recent champagne stock is Volkswagen, the company’s stock value surged up from around the €150 mark to more than €1,000 in less than a year (this occurred in 2008) after Porsche announced it had control of 74% of the German car maker’s operations.
When investors see their stocks dramatically shoot up in value, they celebrate by opening a bottle of champagne, hence the name.
In 2013, American Airlines Group Inc. shares increased in value by 3,165%, that is, for people who bought shares at bankruptcy levels. In the same year, Zone Technologies Inc. reported a 77% increase in service revenue, which triggered enthusiastic purchasing by investors and sent stocks up by 980%.
While some companies may see their stock price go through the roof, others can experience the opposite – and sometimes both.
Concur Technologies, a global provider of on-demand employee spending management, saw its share price shoot up to $48.50 during the peak of the tech bubble in 1999. By March 30, 2001 it had crashed to $0.31. By 2014 it reached $107.