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Study: Tiger cost investors as much as $12 billion

In reference to post Dew did...
http://articles.moneycentral.msn.com/Investing/top-stocks/blog.aspx?post=1514121&_blg=1,1514121

Shares of Woods' sponsors, including Nike, Pepsi and Electronic Arts, have dropped since the golf legend's sex scandal began.
Posted by TheStreet Staff on Monday, December 28, 2009 2:34 PM
By Eric Rosenbaum, TheStreet

Add Tiger Woods to the list of factors that need to be modeled into risk algorithms.
A new study from the University of California, Davis, estimates that shareholders of Woods sponsors Nike (NKE) and Gatorade maker PepsiCo (PEP) have lost $5 billion to $12 billion in market value since news broke about the golf champ’s marital infidelity.

While the public has focused on how the scandal has hit Woods’ endorsement earnings, the UC Davis study said the loss to shareholders of the companies who sponsor him would amount to decades’ worth of endorsement income.
Victor Stango, who co-authored the study with fellow UC Davis economics professor Christopher Knittel, looked at stock returns for the 13 trading days between Nov. 27 -- the date of the car crash that ignited the Woods scandal -- and Dec. 17, a week after he announced his indefinite leave from the sport. The economists compared the returns of Woods' sponsors to those of the broader market and of each sponsor's closest competitor. They also reviewed returns for the four years before the car accident to determine how each sponsor's performance correlates with the market.

In addition to PepsiCo and Nike, the study tracked the performance of Accenture (ACN), American Express (AXP), AT&T (T), Electronic Arts (ERTS), Procter & Gamble (PG) and TLC Vision (TLCV).

P&G owns Gillette and Electronic Arts sells the "Tiger Woods PGA Tour Golf" video game. TLC Vision has since filed for bankruptcy.
The UC Davis study concluded that the scandal reduced shareholder value in the sponsor companies by 2.3%, or about $12 billion, a finding the authors said can’t be explained away by typical stock fluctuations. Shares of Electronic Arts, Pepsi and Nike fared the worst, dropping 4.3%, or $6 billion.

Consulting firm Accenture, one of the first companies to drop Woods, experienced no ill stock market effects from the scandal.
"Nike and other premier sports-related sponsors are special for an athlete like Tiger Woods," the UC Davis finance professors say. "They are themselves powerful brands that add value to Tiger's brand and create other financial opportunities for him."

While the pace of losses had slowed by Dec. 11 -- the day Woods announced his leave from golf -- the study found that by as late as Dec. 17, shareholders had yet to reverse their losses.

The professors say their study speaks to an important question for investors: Do celebrity endorsements present downside risk for shareholders?
"Our analysis makes clear that while having a celebrity of Tiger Woods' stature as an endorser has undeniable upside, the downside risk is substantial, too," the authors say.

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