As highlighted yesterday, UC David economics professor Christopher Knittel found that Tiger Woods-sponsored companies lost as much as $12 billion of market value during the aftermath of Mr. Woods’ recent crisis.
Losses were allegedly so large that they might have exceeded the income Tiger Woods generated for these companies.
CNBC: “Total shareholder losses may exceed several decades’ worth of Tiger Woods’ personal endorsement income,” Victor Stango, a professor of economics at the UC Davis Graduate School of Management and co-author of the study, said in a statement.
Stango, together with co-author UC Davis economics professor Christopher Knittel, looked at stock market returns for the 13 trading days between November 27, when the car crash that ignited the Woods’ scandal happened, and December 17, a week after the golfer announced his indefinite leave from the sport.
Felix Salmon has already attacked the study as completely bonkers, which it is if taken seriously:
Reuters: This is silly stuff, of course: not only are the error bars larger than the estimated losses, but a huge proportion of those multi-billions comes from the decline of the share price of enormous companies like P&G, which had just one exposure to Tiger Woods through its Gillette subsidiary. Drawing a causal relationship between the Tiger Woods scandal and fluctuations in P&G’s share price is simply impossible.
Yet our broader challenge of both the study and the stock market’s reaction to Tiger’s travails is that Tiger Woods’s loss isn’t necessarily be a bad thing. These stocks could end up better off without him.
The upshot of the entire debacle is that these companies will spend less shareholder money on Tiger Woods sponsorship, and more somewhere else. They’ll find other ways to market themselves or invest in other areas of their business, such as product development.
They only lose out if the massive outlays paid Mr. Woods were A) net gains to start with, which is debatable given how vague marketing performance measurement can be, and B) provided a higher return on investment than they could achieve via other forms of marketing or business activity.
Tiger Woods is surely a once-in-a-generation golf player, but it’s pretty unlikely he’s also a once-in-generation investment return. If he is, then he’s under-charging big time. For investors, Mr. Woods’s news is mere static and provided cheaper stock prices.
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