Lies, damned lies and Ronaldo’s Coca Cola snub
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On Monday this week, Cristiano Ronaldo made headlines around the world with a supposed snub of the world’s largest soft drink manufacturer.
As one of the sponsors of the competition, Coca Cola had prominently placed bottles of their familiar soft drink on the desk in front of the five time Ballon D’Or winner. Such product placement is very common in these kinds of press conference and is ultimately how competitions like Euro 2020 are funded.
However, on this occasion, the health-conscious Ronaldo took exception to the sugary soft drink, removed it from the desk and held up a bottle of water, saying ‘Agua!’ (water).
Not so long afterwards, someone, somewhere checked Coca Cola’s share price. To their shock and amazement, the price had plummeted immediately after Ronaldo’s gesture, wiping billions off the company’s value. Such is the player’s clout, that this simple act was capable of doing incredible damage to one of the largest corporations in the world.
It’s a great story, and the news media ran with it. News sites from all over the world were touting the snub as an example of the superstar’s influence and power, trotting out stats about his 300m Instagram followers. Revered and trusted news sources like the Australian Broadcasting Corporation and The Guardian were just as quick to pile on. Some sites were quick to accuse him of hypocrisy for having appeared in advertisements for the soft drink in the past, while others said the stunt could be his “greatest legacy”.
But is it true?
Now, the press conference occurred at 3.45pm on Monday in Budapest, Hungary. Given the 6 hour time difference between Budapest (where Ronaldo’s Portugal were due to play the following day) and New York, the incident occurred at least 15 minutes after the opening of the stock exchange at 9.30am, when the greatest falls were recorded. As such, unless traders can see through time, the fall in the share price and Ronaldo’s gesture were completely unrelated.
So why did the price fall? To a casual observer, yes the share price appears to fall by around 1.6% or 90c between Monday and Friday. However, without even having to click your mouse (on Yahoo finance), you might notice something else, that is very important. The ex-dividend date is Monday 14th June.
For those who don’t know, a dividend is a payment a company makes to its shareholders every few months. When a company makes a profit, it may choose to distribute some of that profit to its shareholders as a return on their investment in the company. Any person who holds a share on the ex-dividend date is entitled to this payment for each and every share that they own.
Now, when a company pays a dividend, the share price will usually fall. This is because a share in a company that is just about to pay a dividend is worth more than one that has just paid it. So given that Coca Cola paid a dividend of 42c on Monday morning, you’d expect their share price to fall by a similar amount.
And the additional 48c? Well, share prices fluctuate from minute to minute and overnight jumps are perfectly common. Similar or greater falls have occurred to Coca Cola’s share price on 10 other occasions over the last 12 months, despite it growing overall by 18% in the same period. By the end of the same day, the price had recovered by 34c.
So 15 minutes before the world’s media was claiming Ronaldo’s Coca Cola gesture had decimated their share price, an entirely predictable, quantifiable and routine event occurred that could explain the whole thing.
