Bad news bears

The publicity surrounding Coca-Cola’s embrace of CAA’s current wave of TV ads, combined with the stern message of sacrifice coming from President Clinton, resulted in the stock of the Interpublic Group of Cos. getting hammered on Wall Street for much of last week. A Friday rebound left IPG at 28.375, but only after the normally strong stock had lost almost 20% of its value between Feb. 9, the day before Coke’s debut of CAA ads, when it traded at almost $35 per share, and Feb. 18, when it closed at $28.
While IPG was slipping, The Omnicom Group’s share price dipped from $42 on Tuesday to $38.375 on Thursday before a Friday rebound. Foote, Cone & Belding also dipped to $31 on Wednesday from $33.25 on Tuesday.
“There was no reason for Omnicom or FCB to be hit,” said Dean Witter Reynolds analyst Jim Dougherty.
Industry sources, noting that IPG’s stock price had been falling since the debut of Creative Artists Agency’s TV commercials for Coke, a duty that used to be the province of IPG shop McCann-Erickson Worldwide, speculated that the publicity surrounding the holding company’s largest client was taking its toll on the stock price. Others questioned that the financial impact of CAA’s involvement in the Coke would have on IPG’s bottom line. Another factor impacting stock prices last week was the possibility that the new administration in Wash- ington might try to eliminate the de- ductibility of advertising as a business expense, industry sources said. Industry analysts, however, blamed the share decline on the uncommon fourth quarter performance. This, some said, may have influenced Omnicom and FCB, since IPG is regarded as one of the industry’s most dependable stocks. ‘People may have said, ‘Gee, if IPG is having a problem, then the other groups will have them,'” said PaineWebber analyst Alan Gottesman. He added that IPG had been trading at an unusually high multiple. IPG reported fourth quarter domestic gross income growth of 0.3% to $152 million when compared to the same 1991 period and international gross income growth of 2.8% to $382 million.
“It was the first quarter in a long time that they didn’t do better than the industry is (expected to),” said Dougherty.
Copyright Adweek L.P. (1993)