Do stocks love a scandal?
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What do a dead dog in an overhead compartment, a smashed guitar and a concussed doctor have in common?
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United Airlines
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The world's biggest airline has been plagued by a number of scandals over the years, each debatably uglier than the last.
First, United Airlines broke Dave Carrollâs guitar. The Canadian singer-songwriter watched his instrument get tossed out of the plane by a couple of reckless baggage handlers.

He begged and pleaded for a little bit of compensation but United refused to budge.
So, in true 2009 fashion, Carroll and his band made a YouTube video.
The internet loved it. And Carrollâs band was quickly propelled into the viral hall of fame, alongside iconic crowd pleasers David After Dentist and Crazy Frog.Â
They wracked up 10m views with sensational lyrics including "My God, they're throwing guitars out there", and âYou're liable, just admit itâ.
And United stock actually hit a bit of turbulence as a result. The share price took a nosedive, crashing $180m in the five days following the videoâs blow up.
But then what?Â
Well, after a quick crash landing, the share price was ready for takeoff again. By the end of the month, it was right back where it started.
A few years later, United hit another rough patch. This time, with an incident involving Dr. David Dao, who refused to give up his seat on an overbooked flight.Â
In a disturbing turn of events, he was dragged off the flight kicking and screaming.
Yet another viral moment for United. This time, footage of the incident racked up about 5m views.
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The share price hardly even wobbled following the incident.Â
In Unitedâs most recent dramatic episode, a woman was told to put her 10-month-old French bulldog in the planeâs overhead compartment. Tragically, the dog died in transit.
A Washington Post exposĂ© then revealed this was no isolated incident. United was awarded the title of âmost likely airline to kill your dogâ.Â
Youâve got to wonder what itâs paying the press team.
What happened to its share price? Well, it actually grew in the week following that news.
The purpose here wasnât to open Unitedâs old wounds. Whatâs interesting is these events provoked public outcry at different levels of negativity but the overall effects on the share price are barely noticeable now.
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Letâs see how Facebook has fared from its drama.Â
Remember the Cambridge Analytica scandal?
Hereâs a brief timeline of events: On Saturday, 17 March 2018, Facebook revealed 50m profiles had been harvested by the group.Â
As soon as markets reopened on Monday the 19th, the share price took a slide.
For a few weeks, Facebookâs share price was struggling. But by April 26th, Facebook saved face and was better off for it. It reached an all-time high.
What this scandal really did was put Facebook on the map for something beyond just being a social media platform. It proved (for anyone who hadnât yet realised) the website was actually in the business of big data.Â
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Thatâs the real reason why it gets so much scrutiny for its privacy and security measures - because itâs sitting on a veritable data goldmine.Â
Thatâs also why iconic fund manager Terry Smith of Fundsmith Equity gobbled up more Facebook shares when they took a fall.Â
He sees the value in Facebook for its advertising. After all, thatâs really itâs only money maker. And it does that well, because a plethora of data helps make for some very, shall we say, accurately targeted campaigns.Â
Others, like Rathboneâs James Thomson immediately sold the stock for that very reason. He described Facebookâs exploitation of personal data as âpollutingâ to its appeal.
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VolkswagenÂ
Speaking of pollution, perhaps those examples didnât result in tangible long-term value loss because they were some hard-to-quantify blunders for the companies at hand.
Well, Volkswagenâs Dieselgate scandal is a whole other kettle of dirty fish.
On September 18, 2015, VW revealed it sold 11m cars bugged with software that could tell when it was being tested for emissions, and could actually change the carâs performance to cheat the system.Â

It turned out, when taken out of their âcheat modeâ, these cars were emitting pollutants up to 40x the allowed emissions levels.
Talk about a real life Transformers model.Â
The share price took a beating following the news. It tumbled on the day of the big reveal, and continued to decline until late November, when it started to heat up again.
It was December 2017 by the time Volkswagen got gassed up back to pre-scandal levels.
So why was it hit so much harder than Facebook or United?
A pretty clear driving factor is that Volkswagen paid âŹ30bn in fines, compensation and buyback schemes for the blunder.
When a number like that get tossed around, itâs no surprise that investors get skittish and the share price gets hurt in the process.
Ultimately, unlike in the case of United or Facebook, Volkswagen had to respond to the scandal with more than just a few flowery press releases.
Heightened visibility over the past few years meant it had to step its environmental, social and governance (ESG) game up. Clearly, Volkswagen realised that being a greener company isnât just about trying to save its tarnished reputation. Itâs about saving itself from future fines.
Just this week, Volkswagenâs announced it will halt production of its petrol and diesel cars by 2035 in Europe, in favour of electric models.
And that makes sense. A YouGov poll found 63% of city-dwellers support an EU-wide ban on petrol and diesel car sales after 2030. So Volkswagenâs set to take advantage of the incoming changes to EU legislation, pushing the vision of a climate-neutral Europe by 2050.
A company can be green and pull in the green. The two arenât mutually exclusive.
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ESG: more than just buzzwords
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And dirty marketing campaign tricks just donât pay off anymore. Backlash from Volkswagenâs April Fools rebrand to âVoltswagenâ proved that investors wanted actions, not words. Thatâs why it took the company years to get back to its 2015âs pre-diesel gate levels.
The rise of the retail investor is also a testament to these demands for transparency, accountability, and action.
Our recent piece, âA message to big oil: clean up or dieâ proves that not even powerhouses like Shell and ExxonMobil are too big to be told off.
And from BlackRock to JP Morgan, youâd be hard pressed to find a big dog fund house without an ESG branch, at the bare minimum.
Plus, rising share prices at green asset management groups like Impax shows weâve seen enough soap-sponsored ducks be cleaned of their goopy oil spilled feathers for one lifetime.Â
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Clearly, not all scandals are created equal. The pandemic has accelerated our engagement with ESG in general, and so these types of wrongdoings are hitting closer to home.
And ESG goes far beyond the often-touted âEâ.Â
Boohooâs well documented lack of attention to the societal problems it was deemed to be contributing to in its Leicester factories shows firms need to do more than go carbon-neutral.
Poor governance standards and letting bad practices seep into corporate life are simply unacceptable. Even if investors donât actively care about having a squeaky clean management team, they definitely care if regulators slam fines on the firm for malpractice.
Weâre paying closer attention, and weâre not willing to let the big guys get away with bs.
Carroll, his broken guitar and YouTube video prove the consumer has long had a voice in markets.Â
But the consumer is now more than just a buyer. As a retail investor, they can turn that voice into action as a shareholder.
Back in the day, a company could run and hide. But it just canât escape the scandal anymore.Â
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How have your shareholdings weathered a scandal storm?â
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- A great way to try Freetrade before transferring your ISA or pension
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- Trade USD and EUR stocks at the exchange rate + 0.99% FX fee
- Access to a selection of Freetradeâs 6,200+ global stocks and ETFs
- 1% AER on up to ÂŁ1,000 uninvested cash
- Fractional US shares
- Access to mobile app and web platform
- General Investment Account
- Stocks and shares ISA
- Access to 6,200+ global stocks and ETFs, including gilts
- A lower FX fee of 0.59% on non-GBP trades
- 3% AER on up to ÂŁ2,000 uninvested cash
- Early market access with pre-market trading
- Automated order types, including recurring orders
- More stats and analysis, including analyst ratings and EPS estimatesÂ
- General Investment Account
- Stocks and shares ISA
- Personal pension
- A lower FX fee of 0.39% on non-GBP trades
- New! Access to mutual funds
- Priority customer service
- 5% AER on up to ÂŁ3,000 uninvested cash
- Free, same day withdrawals