When considering making personal investments, people indulge in an abundance of complex software’s and detailed systems to predict what may happen to a company share price; however, there is nothing in place that can take into account the impact that celebrity involvement may have on the company. Successful endorsement plans exist across a variety of industries, yet celebrity involvement does not always turn out as intended. In some cases, companies can even lose billions of dollars.
This past Wednesday, February 20th of 2019, a historic college basketball game took place. The Duke versus UNC rivalry has always been strong, but this year has been a bit different, as it has grown stronger over the years. The game on Wednesday had record high ticket prices, reaching upwards of $2,500 for a chance to view the teams play. Much of this attention was focused on Zion Williamson, a star freshman on the Duke roster.
The game began shortly after 9:00pm, with Zion securing the jump ball followed by Duke driving down the court. The atmosphere was lively, and the small Duke stadium was filled to maximum capacity. However, the crowd was in for a disappointment. Within 30 seconds from the start of the game, Zion made a hard-right foot plant in his sponsored Nike footwear, tearing the entire right side of the shoe. This resulted in a hard fall to the floor and Zion Williamson did not return to the game.
The aftermath of this event did not end with the game. Later that night, Barack Obama tweeted, “Zion Williamson seems like an outstanding young man as well as an outstanding basketball player. Wishing him a speedy recovery.” Several other high-profile athletes reached out on twitter about the event, including Boston Celtics, Terry Rozier and Utah Jazz, Donovan Mitchell. The event was already being viewed on a national level, and now has immense exposure on twitter with over 100 million combined viewers.
The reaction quickly showed in the stock market as investors were losing confidence in Nike products. The game occurred in the market afterhours of Wednesday, causing the Nike share price to drop 1.7%, losing $1.1 billion in value. Celebrity endorsement can be extremely valuable for some companies; however, with the power that they possess, it can often backfire. Many factors played into the drastic after hours drop that Nike stock endured, largely resulting from the mass volume of people who viewed the incident, greatly declining investor confidence in the stock.
This incident was not the first time the involvement of a celebrity swayed a company’s value. In February of 2018, a well-known American reality television personality, model, and entrepreneur created a buzz within the market. Late in the trading day on Thursday, February 9th, Kylie Jenner tweeted to her 26.4 million and counting group of followers that she no longer uses the popular app Snapchat and often found herself never opening it. This tweet alone caused a landslide in Snapchats stock price, quickly causing the company to lose $1.4 billion in market value, roughly 7.2%.
The impact celebrities had on these companies was significant, and both short-term and long-term ramifications will likely burden their futures. Occurrences like this create a very difficult landscape for companies to assess risk, leaving investors more cautious and less confident.
All in all, celebrity involvement within an industry creates significant new volatility, possessing the power to immediately redirect a company either for the better, or worse. Let’s hope this incident with Zion Williamson doesn’t prove to be too detrimental to Nike’s overall value.