Sponsorship Can Boost Stock Values

According to a study of two dozen NASCAR sponsors, getting involved with the biggest oval track racing organization in the U.S. is good for stock values.
According to a study by a group from the University of Missouri-Kansas City, companies such as Ford Motor, General Mills and Georgia-Pacific have enjoyed big returns on the stock market after announcing they are sponsoring a NASCAR team, according to a study of 24 sponsors.
As reported in USA Today, researchers found the companies enjoyed mean gains in stock market value of more than US$300 million the two days after the announcement
”It’s big money,” says Stephen Pruitt, finance professor at the University of Missouri-Kansas City and study co-author, adding that no other sports sponsorship triggers this kind of stock reaction. ”Investors recognize that when a company does a sponsorship of a NASCAR team, it gets them into a loyal and moneyed demographic.”
The study found that sponsors from the auto industry enjoy the biggest gains. Companies such as Ford Motor and DaimlerChrysler saw 2.4% average increases in their stock prices, beating the 1.3% average stock price gains of all the sponsors.
Tim Conder, leisure analyst at A.G. Edwards, says Wall Street’s initial reaction is reasonable because racing fans will increase their spending on a company’s product by a factor of three after a NASCAR sponsorship. ”The NASCAR fans are very loyal,” he says.
Consumers have a stronger connection with auto racing than with other sports. ”Everyone drives a car. There’s a more direct association,” Conder says. So if a car sponsored by Ford wins, it’s a positive reflection on the brand.
Also, NASCAR sponsors have much freedom and can slap their names and logos onto just about everything in the sport, says Abe Madkour, executive editor at Sports Business Journal. ”Everywhere you look in NASCAR, there’s a sign on a car, track or (guard) rail,” he says. ”The opportunities to maximize your exposure are plentiful.”
But Conder cautions that NASCAR endorsements are a minor factor in long-term stock performance.
Bob Simonson, analyst at William Blair, agrees there are benefits to NASCAR endorsements but says they are hard to measure.
”There is value, but it’s more over time and more feel-good,” Simonson says.
There’s also the question of how long investors will continue to react so positively to NASCAR sponsorships. It all depends on the future popularity of the sport, Pruitt says. ”It all depends on the fickle tastes of the American populous.”