How much can one person influence a stock’s price?

How much can one person influence a stock’s price?

Bryan Taylor, Chief Economist, Global Financial Data


               Adidas ended its relationship with Ye, formerly known as Kanye West, as a result of antisemitic comments that he made.  Adidas both removed its Yeezy Gap product from its stores and shut down the website. It is estimated that the separation from Ye will cost Adidas around $250 million in revenues. Adidas had already said that it was reassessing its relationship with Kanye West as a result of him wearing a “White Lives Matter” shirt during Paris Fashion Week. Ye was also locked out of his Twitter account.

               The result?  Nike stock moved up, rising 3.71 points from 88.01 to 91.72 on October 25. Nike stock has done poorly this year, falling from 166.67 on December 31, 2021 to 91.72 on October 25.

Figure 1.  Nike Stock Price 2012 to 2022

               Is it common for individual celebrities to influence the performance of a stock?  Although it happens rarely, it does happen.

               On June 14, 2021, in a press conference, Cristiano Ronaldo, who was in a Coca-Cola advertisement in the nineties, pushed away two Coca-Cola bottles and drank water instead.  His gesture had a huge impact on the company and the next day, shares of Coca-Cola fell from $55.60 to $52.22 costing the company $4 billion in capitalization.

               Remember Donald Trump?  In December 2016 he tweeted that Boeing’s costs for a new Air Force One commission were “out of control,” and that he was going to cancel the order.  The result? Boeing stock fell by $2 reducing the company’s market capitalization by $1 billion.

               Another example comes from Elon Musk.  In May 2020, Elon Musk tweeted that the value of Tesla stock was too high.  His tweet cost the company $14 billion in capitalization and cost Elon Musk personally $3 billion.  Musk’s reversals of his behavior can cost Tesla and its investors money.  In February 2021, Musk announced that Tesla had bought $1.5 billion in Bitcoin to enable the company to facilitate payments in Bitcoin.  But in May 2021, Musk announced that Tesla would no longer accept Bitcoin and the value of the company’s stock fell by 10%.  Then in June 2021, Musk announced that Tesla would accept payments in Bitcoin.  Elon, make up your mind!

Figure 2. Tesla Stock Price 2017 to 2022


               So can celebrities influence the performance of companies.  Yes, they can, but the impact only occurs in the short run.  Over time, it is the company’s profits and cash flow that determine the value of the company.  Celebrities cannot control the long-run performance of a stock.  So next time a celebrity causes the price of a stock to decline, you may want to see it as a buying opportunity.

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