Just some thoughts and opinions.
Just to take use of market cap a little bit further, there's a bit of a misinterpretation in how market cap is being implied as a value in this situation in my view. The
market value of a company is not market cap; market cap is a measure of the number of shares times the price of those shares at a given point of time which, for a company like Nike, already moves hundreds of millions of dollars positively or negatively on your normal day. Market value is tied to a lot more aspects of a company. Were I to value a company, I'd be looking at it's earnings (EBITDA on through), it's ratios, it's long-term debt load, it's growth potential, and so forth. Areas where Nike has been performing well. If I care about enterprise value, then I straight out care about a lot more than market cap.
Stock losses, either in terms of units or a temporary reduction in price, can sound bad, but in reality most companies can weather quite the loss in stock value (because the company is more than its market cap). Temporary reductions in stock price are just that, temporary, and the loss is not permanent. Saying something cost Nike $4 billion could imply that money is gone forever, but the units are still there and value can still recover and then increase beyond that so that's not really the case. Nike has had larger market cap changes in the past year alone which it also recouped from easily and didn't cripple the company. Stock prices are inherently transient. It's just an easy go-to measure for those journalists who do not normally cover the investment industry to describe the scope in something that sounds relevant, impactful and large. There's a couple of reasons why this isn't a problem for Nike:
1. The drop was small. Yes, 4 billion dollars sounds like a lot, but Nike will probably have recouped it in a week. In fact, from a company point of view, it's more like temporarily not having the market cap than losing it. Especially since...
2. Of the few unit holders who left the majority will likely be back, reducing the overall net reduction in market cap as a result of this campaign. Scaring off a few of your institutional investors and asset managers who worry about being invested in a politically exposed company might be a problem for Nike, but that is a short term issue. Most asset managers haven't dropped it from their books and, notably, a lot who are known as high performers (for example, Mawer) have kept it in. Get a sufficient number back and you won't have really lost any market cap on the balance, in part because...
3. People want to invest in Nike. People in the investment business are in it to make money, and Nike has been making investors
returns. Bolded. Year to date growth is almost 30%, even with this drop. People seeking returns want to hold Nike. Even a "boycott" the size of this one won't matter because...
4. Nike's demographics aren't really reflected by the boycotters. More successful boycotts include loyal customers to the company who make up a sizable chunk of their revenue streams. Nike's sale demographics aren't exactly heavily weighted towards the politically active, conservative, generally older, and majority white, majority male demographics, the group most likely to have some members take boycott action in this situation. In fact, Nike's demographic isn't even wholly "American." Nike is a brand that, like many large cap companies, is heavily international. The segment of Nike's business in the US has been a consistently declining portion of their sales for years in contrast to growth markets elsewhere. Shoppers in South East Asia and South America don't really care about who kneels where. Additionally...
5. Sales will tell, and the story they tell will likely be positive. Destroying already purchased goods won't reflect on the balance sheet. Nike is a company already delivering on the sales front, so the expectation is that they will continue to deliver. Demographics that are on the other side of this debate may like to the fact that the company had taken a stance on this issue, including the affluent, more liberal population, the college educated, minorities, and women, all groups a lot less likely to be angered by the kneeling and a lot more likely to support the company. Remember, the American consumer base, and the much smaller portion likely to take boycott action, is not going to impact one of the strongest companies on the market. Any growth will boost the share price and value, and growth for Nike is highly likely. Strong quarterly sales that can be attributed to this campaign in any way, or even the ability to say the boycott didn't impact sales much in North America, would boost that value even more. This can't even be fully measured in a period of months, because...
6. Nike is future proofing. Short term (likely measured in days) reduction in market cap for increased brand support from favourable demographics in a market they needed a shake up in? People might be nervous right now, but it's a good move to solidify support among the groups more likely to be buying your goods in ten, twenty, or thirty years, and that increased value from brand support will help a lot. Millennials aren't really offended by this, and they will be buying these goods when people who are angry about it are a much smaller part of the population due to simple passage of time. Being socially conscious is a selling point for both liberals and conservatives -- Nike recognizes it sells on it's brand and needs to be able to trade on that value with the primary people who purchase it. Finally...
7. Nike isn't being caught unawares. They knew this would cause a fuss. They knew they would lose market cap temporarily until the fervor dies down. They are in control of this campaign. People know this, and can tell they made this decision with the full knowledge of the ramifications. They were prepared and are acting quickly. They were able to reach out to analysts and speak with major partners early on and controlled the messaging and work to counter the outrage. That's enough for people with money in the company to stick with it while the temporary outrage blows over.
It's entirely possible that the over $160 million of free coverage is worth it, as a result.
The value of free media has increased, and it's likely to keep on increasing. After all, threads like this are still active. Remember as well, only about a third of the coverage has been negative, with far more being neutral or positive. Also that this is only the cost of the advertising being valued, not the impact such coverage has on sales (no one advertises dollar to dollar with sales). Any boost in sales from all that free advertising necessarily likely increases the share price; another reason why that $4 billion doesn't really matter that much. As the majority of the market cap rolls back in and the reasons for future growth look good for any of the reasons above, it's entirely possible that not only will that temporary loss in market cap have been worth it, but that the value to the company will have been significant with few deleterious effects.
In the more political, partisan parts of the media, there is a real drive to make this sound massive and important. For those people who work in jobs that, say, have access to S&P Global, Morningstar, or Bloomberg, they are seeing a different, less drastic story playing out between the analysts. Nike probably cares more about potential tariff announcements than anything else as a result. Most companies are prepared to handle political fallout, not just Nike.
I'm not saying that the boycott has had no impact or that people shouldn't boycott products they don't like for whatever reason, political or otherwise. But everyone involved knew it was coming, prepared for it, and it's impact will likely be (and kind of already is) minimal, in my mind.
All just my own opinion, of course.
Just your opinion but an informative and appreciated opinion. Thanks
CKA Super Elite 
CKA Super Elite 
