In 2009, within five days of a YouTube song called “United Breaks Guitars” being released, United Airlines lost 10% of its market value, costing shareholders roughly $180 million dollars. Sometimes, the power of one person, with a little boost from social media can make or break a company.
So how did this happen?
In 2008 Canadian musician Dave Carroll was travelling with his $3,500 guitar from Halifax, Canada to Omaha, Nebraska, with a layover in Chicago. He arrived at his destination to find that his guitar was badly damaged. He filed a complaint, however United Airlines informed him that he wasn’t eligible for compensation as he failed to make the claim within its stipulated "standard 24-hour timeframe"
After nine long months of wrangling, emails and phone calls back and forth and to no avail, Carroll did what he does best: he wrote a song about it. And this song went viral… Within one day, it amassed 150,000 views. Three days later the video had over half a million views, and a month later, around 5 million. And it wasn’t long before the press caught wind of the story, propelling Carroll’s fight further still. As of early 2021, there have been over 20 million views and 200,000 likes.
Whether you believe that this had a direct effect on the share price and dividend payouts, or prefer to believe that actually this claim is a little exaggerated as UAL was actually already on a downward trajectory, you can’t help but see the power that one angry person with a social media account can have on a company’s future.
United Airlines aren’t alone, there are few household brands out there that haven’t had a social media mishap. Take Snapchat for example, who in a 2018 ad for the game “Would You Rather?” asked users whether they would rather slap pop star Rihanna or punch rapper Chris Brown - alluding to the 2009 domestic abuse incident when Brown assaulted his then girlfriend Rihanna. Yikes. A poor taste gag which allegedly cost the company $800m in market value.
Whether it’s a poorly thought out tweet, a badly timed joke, or a customer complaint, social media can destroy a company’s reputation in minutes. And it’s not just customers, trolls or in-house social media managers that companies need to be wary of; in 2016, Tesla kingpin Elon Musk tweeted that the company was working with Panasonic on it’s next electric car, sending the current collaborators - battery manufacturer Samsung SDI's - market value plummeting by more than half a billion dollars. Fake news can also lead to market drops - in 2019, shares in the UK's Metro Bank dropped 11% before it could rectify inaccurate social media rumours that it was facing financial difficulties.
If there is one thing that these horror stories, and the entirety of 2020 has taught us, it’s that nothing can be taken for granted, and that we need to be flexible. The markets rise and drop, share prices fluctuate and some things - like a disgruntled passenger writing a curiously catchy and viral country tune - can’t be accounted for. However many things can be accounted for - like UAL’s downward stock-price spiral which had been on the cards for some time. This would have been seen by keen eyed analysts across the globe thanks to good old fashioned fundamental analysis, something we at Upside hold in great esteem.
Research is key, and not just once, before an investment is made, but continuously throughout the life of the investment you have made. It’s about research, revision and realignment when you see changes in a company or the market.
There’s an art to penning a Mary Whitehouse style complaint, and a science to being right.