Yes, Your Beloved Celebrities have an Effect on Your Stocks and Shares!
When celebrities get rid of their frustrations via a scathing tweet, the companies and brands associated with them feel the impact, not just in the bad press but also in the dipping share prices. Reality star Kylie Jenner tweeted she had ditched Snapchat, and while Jenner is not capable of moving Wall Street with a simple phrase, the market takes note when she speaks. Snap Inc. and it’s shares fell by 6% and more in trading after her tweet, a loss of $1.3 billion in market capitalization.
The question is: How perilous are celebs to your stock trading? The answer is that famous figures and stars can have a negative effect on stock trading. A Kellogg School study shows that the longer the media covers a boycott, the greater is the impact on a company’s stock price. The price of stock from a targeted company fell by almost 1% during each day of media coverage, specifically from print media. A celebrity allied to the cause keeps any story alive in the headlines.
The boycott of companies with controversial National Rifle Association (NRA) relationships including tech giants Apple and Amazon, as also FedEx and Roku, is backed by a group of celebrities including actors Alyssa Milano and Debra Messing. All companies saw their share price drop immediately following the celebrity endorsement of the boycott. While all stocks have largely recovered, this story could gather momentum with further impact on stock prices. Delta Air Lines, United Airlines, Avis and Hertz cut ties with the NRA and major corporates distanced themselves from the NRA. The First National Bank of Omaha has stopped issuing NRA-branded credit cards. As far as reputation is concerned, the pressure to take an anti-NRA stand, builds as more corporates withdraw support or ties and any mass-shooting only intensifies this
But a celebrity can be a good guy to expose unethical practices of giant corporates. Over the years, scandals surrounding brand ambassadors like Tiger Woods and Lance Armstrong hit companies hard where it hurts, in profits and reputation. In both cases, these sportsmen were legends in their field and were rewarded by profitable sponsorship agreements. After Armstrong’s drug scandal involving performance-enhancing medication, sponsors including Trek Bicycles, Nike, and Michelob dropped him. Tiger Woods’infidelity and his subsequent admission in 2009, ended his sponsorships with Gatorade, AT&T, Accenture and Gillette severing ties with the golfing legend.
Nike, which signed Woods in 1996, stood by their man and the player wears and promotes Nike golf clothes and shoes. Nike perceived Woods more favorably than Armstrong mainly due to the fact that Woods had neither been branded a cheat nor his stellar achievements in golf ever called in to question. Nike was actually hit by Woods’ fall from grace and his loss of form and subsequent fall in world rankings. In 2009 it had estimated that Woods’ break from professional golf, left Nike with a $30m loss in sales and shrink audiences by up to 50%. Another University of California study suggested that the Woods’ scandal cost shareholders of companies endorsed by him, up to $12bn in losses. Without Tiger Woods’ affairs, the launch of reputation risk insurance may never have surfaced. The DeWitt Stern product coverage protects advertisers, brands, and corporate entities against losses due to reputational risk crises.
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