A look at a company’s SEC filings, and it’s easy to see the laundry list of a company’s risks ( Uber’s is impressive, for instance ), and how many of them involve laws and policy.
But there’s a quick shortcut to learn how companies perceive this risk.
“If you want to know which ‘Big Tech’ company is likely most exposed to regulation, look at how much they spend on lobbying for their perceived risk of legal action,” said Nicholas Colas, co-founder of DataTrek Research, in a recent note to clients.“Amazon and Facebook, for example, have spent the most on lobbying of all companies so far this year at $12.4 million and $12.3 million, respectively.”
Furthermore, Colas noted, the companies spent a record quarterly sum on lobbying in the third quarter of 2019 — and are on pace to top 2018 highs.
Colas’s co-founder Jessica Rabe dove deeper, noting that it’s remarkable that tech holds the top two spots, “even higher than a heavily scrutinized pharma industry or a deeply troubled plane manufacturer.” Northrup Grumman ($11.0 million), United Technologies ($10.5 million) and Boeing ($10.4 million) follow the tech giants.United Technologies made news in the early days of the Trump administration when the president attempted to prevent jobs from being outsourced to Mexico.
The fact that the tech companies are outspending Boeing, whose CEO Dennis Muilenburg testified in front of Congress this week , “reflects just how risky these companies perceive their regulatory environment,” wrote Rabe.
Currently, both Facebook and Google face antitrust investigations.Facebook also faces regulatory scrutiny of Libra, the company’s blockchain project that has raised the eyebrows of U.S.
and global policymakers .
Who is spending big right now? Tech.For an investor or someone looking at how a company is spending, the Center for Responsive Politics’ OpenSecrets.org project organizes public data into who is spending.DataTrek pulled out some of tech’s biggest lobbyists .
Amazon, which has faced pressure from President Trump, spent $4 million in Q3 2019, which Rabe noted was the most the retail giant had ever paid in DC lobbying in a quarter.
FILE- In this Sept.5, 2018, file photo an empty chair reserved for Google’s parent Alphabet, which refused to send its top executive, is seen before the Senate Intelligence Committee hearing on Capitol Hill in Washington.(AP Photo/Jose Luis Magana, File) More Facebook’s spending is up 70% for Q3 compared to last year, and it looks as if they will pass their previous record of $12.6 million.
“That Mark Zuckerberg just testified in front of Congress on Facebook’s Libra cryptocurrency and the company’s role in American political life (among many other topics) is likely no coincidence,” said Rabe.
On the other hand, Alphabet, Google’s parent company, has spent about half of what it spent last year in the third quarter, and is far behind the pace to hit $21.8 million as it did last year.
“That drop is not because GOOG feels less regulatory pressure, but is more likely due to the company reorganizing their lobbying operations,” Rabe says.
“Even with the reshuffling of its DC operations, Alphabet is still the ninth-highest spender currently on lobbying this year.”
What it means for investors Datatrek’s main takeaways are that size of these three companies create potential investment implications across two sectors, communications (Facebook and Google) and consumer discretionary (Amazon).Combined, they make up a significant amount of the S&P 500 index — 7.8% in market cap..
