When do US sanctions on Iran move a share price?
ZTE, 2018: the export ban that kicked in
Short answer: this is the one case where an official document warned of the exact penalty a year ahead. The shares still fell only 7-8% beforehand and 43% after.
What happened
- The action: on 2018-04-16 the US Commerce Department banned US companies from selling to ZTE for seven years (Federal Register notice).
- Why: ZTE had made false statements to the US about disciplining the staff behind its Iran sales, which broke the terms of its 2017 settlement.
- Trading halt: ZTE’s Hong Kong shares were suspended from 2018-04-17 to 2018-06-12. By the time trading restarted, ZTE had agreed a new US settlement, so the fall after includes both the ban and the settlement.
Warning signs before the action
- 2017-03-07, guilty plea: ZTE pleaded guilty to shipping US goods to Iran and agreed to pay US$892M, with another US$300M suspended (Justice Department release).
- The suspended ban: the March 2017 settlement included a seven-year export ban, suspended unless ZTE broke the terms. The 2018 notice quotes this (Federal Register notice).
- Not public: the false statements themselves, in letters ZTE sent to the US in 2016 and 2017. They came out only on the day of the ban.
Share price before and after
- Before the action (against the local index): −8.3% over 60 trading days, −6.9% over 20, −0.9% over 5.
- After: −42.9% after 1 trading day, −51.8% after 5, −39.5% after 20.
What this shows
- Everyone could read the penalty, but no one knew it had been triggered. The slide beforehand was small compared with the fall after.
How we measured
- Share move: the company’s share price change minus the local index change, from daily closing prices (Yahoo Finance).
- Before: from the close 60, 20 and 5 trading days before the action, up to the last close before it.
- After: from that last close to 1, 5 and 20 trading days later.
- Data and code: case_study_summary.csv, case_study_price_paths.csv, scripts/case_studies.py.
- Saved sources: receipts/case-studies.