Donald Trump’s comments are influencing share prices and reputations. How can you prepare for the dreaded Trump tweet or press conference rant?
Civil rights activists, Oscar-winning actresses, heads of state, news networks – especially news networks – corporations and entire countries have borne the brunt of US president-elect Donald Trump’s ire on Twitter.
As the Wall Street Journal said earlier this week, ‘in addition to all other risks out there, there’s now the Trump risk.’
His tweets and press conference remarks have already had an impact on the share price and reputation of several companies and, judging by his prolific use of Twitter, that doesn’t show any sign of easing.
‘Public policy is often not top of the list in terms of areas to stay abreast of,’ says Bryan Armstrong, senior managing director at FTI Consulting. ‘But in this administration it would behoove almost every IRO to know what’s going on around the White House and on Capitol Hill.’
SHARE PRICE RISK
In his first official press conference since winning the election, Trump took aim at the pharmaceutical industry, saying it is ‘getting away with murder’ in relation to its bidding processes. Fortune reports that the value of the nine biggest pharmaceutical companies by market cap on the S&P 500 – including Johnson & Johnson, Pfizer and Merck – dropped roughly $24.6 bn in the 20 minutes following Trump’s comments.
In late December he tweeted about the ‘tremendous costs and cost overruns’ of Lockheed Martin’s F-35 aircraft program. The tweet caused an immediate fall of about 2 percent in the defense firm’s share price, wiping almost $1.2 bn off the company’s value.
In the same tweet, Trump mentioned that he had asked Boeing to explore an alternative aircraft program, which resulted in a 0.5 percent increase in its share price.
Based on the tremendous cost and cost overruns of the Lockheed Martin F-35, I have asked Boeing to price-out a comparable F-18 Super Hornet!
— Donald J. Trump (@realDonaldTrump) December 22, 2016
He’s also taken aim at Toyota (wiping $1.2 bn from its value in five minutes) and General Motors (causing an almost 3 percent share price drop), while praising Ford, Fiat, Walmart and Bayer for agreeing to create jobs in the US. In each case, his comments have had an immediate impact on the company’s share price.
Toyota Motor said will build a new plant in Baja, Mexico, to build Corolla cars for U.S. NO WAY! Build plant in U.S. or pay big border tax.
— Donald J. Trump (@realDonaldTrump) January 5, 2017
Bloomberg, which integrated tweets into its financial information-tracking platform in 2013, recently launched a tool specifically to track Trump’s tweets. According to a statement from Ted Merz, Bloomberg’s news content manager, it’s one of the fastest-growing alerts the firm has ever launched.
‘The almost instantaneous movement in stock prices following some Trump tweets, most notably for Toyota, suggests to us that traders are using algorithms that execute trades immediately,’ Merz says.
Darrell Heaps, CEO of Q4, agrees. ‘The reality is we live in an era where massive amounts of big data – from millisecond trading statistics to live sentiment from tweets – are being fed to complex computer systems and machine-learning algorithms, which drive buy/sell decisions,’ he explains. ‘Stories from major influencers, like Trump, are picked up, processed and buy-side and sell-side orders are made in the blink of an eye.’
REPUTATIONAL RISK
Trump’s tweets aren’t just influencing share price. Brandwatch, which tracks social media data, recently analyzed Trump’s impact on companies’ reputations for CNBC.
On December 5 Boeing’s social media mentions were 73 percent positive. Following Trump’s tweet about cancelling an order for a new Air Force One on December 6, the aerospace company’s online mentions increased by almost 5,000 percent – but its approval more than halved to 32 percent.
Boeing is building a brand new 747 Air Force One for future presidents, but costs are out of control, more than $4 billion. Cancel order!
— Donald J. Trump (@realDonaldTrump) December 6, 2016
Considering it takes little to aggravate Trump (as Saturday Night Live and Alec Bladwin know all too well), experts recommend creating a crisis management plan now. Deb Wasser, executive vice president of Edelman Financial Communications, says: ‘We recommend starting with a clear assessment of your risk areas, using history and Trump’s Twitter feed as your guide.’
Clearly there are industries and companies that are more at risk than others: anything related to government contracts, American jobs, drugs pricing and offshore tax structures puts a company in danger.
In the instance an attack occurs, Wasser says a concrete crisis management plan will help steady the ship. ‘There is a big risk to overreacting,’ she warns. ‘The reasons for whatever business decision you have made that attracted this attention will still be there tomorrow, and knee-jerk reactions aren’t necessarily what’s best for your business.’
Image from Flickr user Gage Skidmore.
