Commetric has launched a new service suite geared to help companies determine the financial impact of every instance of media coverage, and thereby place a financial value on good and bad communications by mapping them onto share price performance.
Gemma O’Reilly has covered the story in PR Week, quoting Anthony Payne, the founder of Peregrine Communications Group:
“Any tool that helps quantify PR impact is to be applauded. Our client M Capital is in fundraising mode and has been tracking traffic to its website, which has spiked in line with media coverage. We also noted an exact correlation in the jump in JP Morgan Private Equity’s share price to a story by Nick Hasell. This new tool, which attempts to put news into the context of built-in investor expectations, could be an excellent addition”
But the strength of Commetric’s new Equity Prioritiser and Equity Optimiser services goes significantly beyond PR optimisation: our clients are starting to make use of them to accurately quantify the share price reaction — and over-reaction — to hundreds of different business activities that are reported in the media.
The new services were developed in partnership with CommEq Asset Management (an abbreviation of ‘communication equity’), whose patent-protected methodologies are used every day to trade on the New York Stock Exchange. The technology uses advanced natural language-processing software and sophisticated mathematical models to automatically, consistently and objectively map millions of news items against hundreds of thousands of stock price movements and billions of intra-day movements. We isolate the abnormal share price impact of more than 350 distinct business issues, and track more than 1,600 public companies across several exchanges.
Whereas traditional reputation analysis has tended to rely on the subjective assessment of positive and negative coverage in the mind of the analyst, Equity Prioritiser and Equity Optimiser by contrast, identify good and bad news with reference to the expectation of key stakeholders, analysts, traders and investors.
I’d like to share with you a recent interview given by Commetric’s Christofer Solheim in which he explained the importance of this innovation:
“For some time traditional media analysis has been the defacto method for measuring communication success. What we have now is a tool that not only identifies the issues in the media that are most impacting on a company’s share price, and what corporate news and actions are to blame, but also gives a clear indication on future business strategy and communications tactics. In an age where every marketing pound must see a return, such analysis will be vital in ensuring those pounds are effectively spent.”
He went on to illustrate the complex nature of City communications, using the example of a pilot we recently undertook with the construction industy in the UK. We analysed three major PLCs and found that:
“Sometimes a share price can rise even when a major PLC announces losses or falling earnings. On the face of it, you might expect ‘bad’ news to impact negatively on share price, when in fact the losses might not have been as bad as the City expected. Conversely, ‘good’ news such as a major new contract win can result in a share price fall. It might be that commentators adjudge the business to be over-reaching itself financially, or it could just be that news of the win is contained in an article that generally talks about a downturn in the industry, and this again may cause a share price to fall.”
A subsequent project we carried out in the banking sector indicated that the three biggest long-term reputation drivers for HSBC’s share price were:
- Financial performance
- Shareholder activism
- Explicit references to business strategy. (In contrast, for Barclays the key driver was the coverage of the planned sale of assets.)
Another pilot, this time in the US, revealed that coverage around Pepsico’s CEO often unnerves the market, and is strongly and persistently associated with a decline in the stock. We also found that the most sensitive driver of share price for another Fortune-100 client in the food and beverage sector was news of lay-offs. Christofer affirms that the benefits are sure to be incontrovertible:
“Having these insights, and being able to demonstrate and visualise them in unequivocal terms, will I’m sure help many businesses seriously re-think their business priorities and communication strategies.”
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