CHAPTER ONE
DID RONALDO MOVE THE STOCK MARKET?

Who’s the best soccer player in the world? Well, it depends on how you ask and whom you ask. Asking who’s the best player of all time may elicit a different answer than asking who’s the best active player. And of course, the answer will be subjective. In 2022 prior to the World Cup, one list1 had the top three active players as Lionel (Leo) Messi, Cristiano Ronaldo, and Neymar da Silva Santos, Jr. (known simply as Neymar). Born in Argentina, Messi was named the Fédération Internationale de Football Association (FIFA) world player of the year six times, and, by the time he was only 24, had scored 233 goals for Barcelona to become the fabled club’s all-time leading scorer.2 Ronaldo, born in Portugal, was a five-time FIFA world player of the year, and in the 2017–18 season, playing for Spain’s Real Madrid, scored 44 goals in 44 games.3 Neymar, born in Brazil and one of the country’s most productive scorers, played for Barcelona between 2013 and 2017 and was a chief contributor to the club’s success.4

Who’s the greatest social media influencer in the world? If we narrowly define what we mean by influencer, this question has a more objective answer. Based on Instagram followers as of 2024, it’s not even close. And it turns out to be one of the three top soccer players. Messi had 496 million followers. But Ronaldo was a clear number one with a whopping 616 million followers—now that’s influence! (In case you were wondering, Selena Gomez was in the number-three spot with 429 million followers.)

RONALDO AND THE COKE BOTTLES

Here’s a story you may have heard about that speaks to Ronaldo’s influence beyond the soccer pitch. This headline from the Washington Post, on June 16, 2021, said it all: “Cristiano Ronaldo snubbed Coca-Cola. The company’s market value fell $4 billion.”5 The article referred to an incident at a press conference on June 14, 2021, during the 2020 European Championship (postponed until 2021 due to the Covid-19 pandemic). At the start of the press conference in Budapest, before Portugal played Hungary, Ronaldo proceeded to remove two bottles of Coke that were prominently displayed on the table in front of him. This was shocking because Coca-Cola was one of the tournament’s official sponsors. He replaced them with a bottle of water, saying, “Agua. No Coca-Cola.” It was immediately big news. A YouTube video of the incident has been viewed over 22 million times.6 (Portugal went on to beat Hungary three to nil, with Ronaldo scoring late in the match on a penalty kick, and another one in stoppage time.)

The Washington Post article was very conclusive: “The simple gesture [of moving the Coke bottles] had a swift and dramatic impact: The soft drinks giant’s market value fell $4 billion, highlighting the power and impact that celebrities and influencers can have on the market.” That implies a clear cause-and-effect. The cause was the action by Ronaldo, a celebrity and influencer, snubbing Coca-Cola by removing Coke bottles. The effect of Ronaldo’s action was a substantial drop in the market value of Coca-Cola. Case closed! Or was it? Let’s take a closer look.7

ANOTHER EXAMPLE OF CAUSE AND EFFECT: EX-DIVIDEND DAYS EXPLAINED

But first, an important digression and explainer of another example of cause and effect. This one doesn’t involve influencers. Established companies like Coca-Cola pay regular cash dividends, usually on a predictable quarterly cycle. The timing of upcoming dividend payments isn’t a surprise to the market because companies announce their plans ahead of time. There is a cutoff point, known as the ex-dividend date, and that’s announced in advance as well. After that date, anyone who becomes a new owner of shares doesn’t receive the imminent dividend.

Here’s a simple hypothetical example. On May 1 a stock is selling for $10 per share. There’s an upcoming dividend of $1 per share to be paid on May 15. The ex-dividend date is May 2. The stock is priced at $10 in anticipation of the upcoming $1 dividend. If you own the stock on May 1, you’ll be getting the upcoming dividend. Then on May 2 the stock trades ex-dividend, which means anyone buying shares on that day or later won’t be receiving the upcoming May 15 dividend. So, unless there’s new information relevant to the stock’s value, we would expect the stock to drop by $1 on May 2, the ex-dividend date.

Here’s a real example. June 14, 2021, was an ex-dividend date for Coca-Cola.8 That meant that anyone who first bought the stock on that date wasn’t eligible for the $0.42 per share dividend that was going to be paid on July 1. With 4.3 billion shares outstanding, that’s a total cash payment of about $1.8 billion. So, absent any other relevant information, we would expect Coca-Cola’s market value (stock price times the number of shares) to drop by that amount on the ex-dividend date. For anyone who owned the Coca-Cola shares prior to June 14, 2021, the anticipated share price drop wouldn’t affect their overall wealth since they were entitled to the upcoming cash dividend. June 14 just happened to coincide with the day of Ronaldo’s press conference.

WHAT REALLY HAPPENED ON JUNE 14, 2021

Now let’s see what was really happening with Coca-Cola’s stock around the time of the infamous snub. On Friday, June 11, Coca-Cola’s stock price closed at $56.16 a share. The company’s shares had an overall market value of $242.6 billion. On Monday, June 14, when the market in New York opened for trading at 9:30 a.m., the stock was at $55.69. That price was down $0.47 a share since Friday’s close, or a market value decline of $2.0 billion. In the absence of any major news over the weekend, we would have expected the stock to drop by $0.42 a share, the amount of the upcoming dividend, or overall by the total cash payment of $1.8 billion. That’s fairly close to what actually happened. The S&P 500 index, a broad measure of the overall U.S. stock market, hadn’t moved much between its Friday close and Monday opening. It was up just 0.02 percent, and so that didn’t seem to impact on Coca-Cola’s opening price.

Coca-Cola’s stock price continued to drop during the next several minutes, from $55.69 at the 9:30 a.m. open to $55.27 at 9:43 a.m. By that time, the overall Coca-Cola stock value had declined by $3.9 billion since the Friday closing value. That sounds like a lot of money. But to put that in perspective, it’s just 1.5 percent of the Friday value. Furthermore, half of that amount (0.75 percent or $0.42 per share) was because of the ex-dividend date effect. Subsequent to the June 14 market opening, the S&P 500 index declined only slightly, so we can conclude that there was some other reason that caused the unexplained drop of about 0.75 percent. Perhaps it was related to the outlook for Coca-Cola or the beverage industry. But that’s not surprising. New information and changes in investor expectations cause stock prices to move all of the time.

What’s important is that Coca-Cola’s stock price drop occurred prior to the start of Ronaldo’s press conference. Ronaldo removed the Coke bottles at 9:43 a.m. (New York time). From 9:43 a.m. through the remainder of the trading day, Coca-Cola’s stock price actually rose, both in absolute terms as well as relative to the overall market. It went from $55.27 to $55.55. So how about this for a revised story headline: “Cristiano Ronaldo snubbed Coca-Cola. The company’s market value then rose by $1.2 billion.” If that was the new headline, would we then try to infer cause-and-effect and conclude that Ronaldo was a past-his-prime-has-been and no longer an influencer?

Let’s go back to the Washington Post headline: “Cristiano Ronaldo snubbed Coca-Cola. The company’s market value fell $4 billion.” Taken literally and separately, each sentence is a true statement. There’s no question that Ronaldo’s removal of the Coke bottles and his statement “No Coca-Cola” was a deliberate snub. And based on the change in Coca-Cola’s closing stock prices between Friday, June 11, and Monday, June 14, Coca-Cola’s market value dropped by more than $4 billion. But placed together, the implication is that one thing caused the other. That’s clearly not what happened.

Correlation describes the extent to which two things are related to one another. Is there a correlation between the snub and the stock price decline? Yes, as they both occurred on the same day. But the evidence indicates that within that particular day, the snub didn’t cause the drop in the stock price. What we do know—and is well established—is that Coca-Cola’s stock going ex-dividend was the primary cause of the price decline at the opening of trading.

A few days later, an Associated Press article was much more accurate than the Washington Post article when it stated, “A drop in Coca-Cola’s share price this week was attributed by some to Ronaldo’s snub, but without any evidence that the two things were connected.”9...