Over the last few months, we have witnessed a battle between large hedge funds and retail investors. The subject of that battle was GameStop – an American videogames retailer.
What is happening on Wall Street? A dozen of people found a way to rebel against a large corporation. This is of course an oversimplification. Behind this sentence lay billions of dollars, the investment acumen of an “average” man, automated trading algorithms, and the history of an entire generation, which is still recovering from the 2008 financial crisis and its consequences.
How one deal on the New York Stock Exchange turned into the symbol of a global movement
A large hedge fund tried to undercut the shares of a company looking for profits. A man from Boston saw what is happening and started buying shares, positioning himself against the large hedge fund over the span of a year. Thanks to modern communication channels this stimulated other people across the USA to express their dissatisfaction with the way large companies operate on the stock exchange, and they followed suit in buying shares.
When this information, niche up to that moment, but available on the global Reddit forum, became news, media all over the globe started speaking about it, which led to the wave becoming a tsunami and people from Wellington to Amsterdam and from London to Los Angeles, announced their support by buying GameStop shares. This led to the temporary ban on buying the shares of 14 companies on a few platforms for retail investors, one of them being Robinhood.
The toothpaste had already left the tube and no one could get it back in so companies turned to PR experts to salvage their reputation.
Lesson 1: Being upfront with your clients pays off
The clients and employees of a company do not like feeling betrayed or lied to. This is especially valid when it comes to the money they invest or spend. When they halted the buying of stocks on their platform, Robinhood, who promised democratisation and free access to every average person to the stock market, left all their clients with a sour taste in their mouths and a vague explanation, which was taken as an insult.
Robinhood explained that they have halted buying for “the good of their clients”, which was a message that translated to clients as “you just don’t get it”. Later, they published a more coherent explanation on their blog, but it was already too late to turn public perception around. In fact, Robinhood’s actions were the result of the company’s need to accumulate capital, so they ensure liquidity in the bizarre situation.
Despite this being explained it had no meaning for Reddit forum discussions as everyone who felt part of a movement has already started regarding Robinhood as the Sheriff of Nottingham. Currently, we already have whole manuals circulating the forum on how to transfer one’s entire portfolio to a competitor.
Even if it did not influence the company most disastrously, their reluctance to communicate openly amidst an explosive situation could lead to serious losses in terms of market share and reputation.
This all could have been avoided with a glance at social media and a brief analysis of the developing situation.
We all know the lesson – “Check the news daily”, but communication experts who keep themselves current with the times are aware that traditional media is not the only channel with value for their client, brand, and product, as what is happening on Twitter, forums and Facebook is also essential. This is why media monitoring and analysis tools have been used by more communication experts, who prefer to stay ahead of events as well as their competition.
Lesson 2: Be prepared before speaking
Considering how unique the situation is and the fact that everything unfolded over a period of a few hours, as well as the fact that this is not a topic that many people are well versed in, the media turned to experts for their opinions. Those interviews showed us that there is a substantial difference between being an expert in your own field and an expert who is also aware of the context of the situation. First, let us look at the bad example as CNBC invited billionaire investor Leon Cooperman, who said the following about the situation on 25.01.2021:
“It’s just a way of attacking wealthy people. It’s inappropriate and we all gotta work together and pull together.”
Cooperman also advised retail investors to sell while they can, as the situation they are in is not because of their investment acumen, but instead is just pure coincidence. He also claimed that it is a “coordinated attack on wealthy people”. Looking over the interview and social media mentions we learn that Cooperman’s communication team has not even glanced at the social media conversation and has left their client at the mercy of fate.
On the other end of the spectrum was Chamath Palihapitiya, a famous proponent for Bitcoin and billionaire investor. Palihapitiya was one of the few people to demonstrate an efficient and pro-active PR position:
“Instead of having ‘idea dinners’ or quiet whispered conversations amongst hedge funds in the Hamptons these kids have the courage to do it transparently in a forum. What it proves is this retail investor phenomenon is here to stay. There are 2.7 million people inside wallstreetbets. I think they are as important as any hedge or collection of hedge funds.”
Palihapitiya admitted to having followed the conversation on Reddit for a few days to familiarize himself with the way users discuss and express themselves on this particular topic. This shows that he and his communication team understood the importance of having the speaker be informed in the context of the conversation. The understanding of that context – from sentiment to expressed user needs, could position him as one of the few people who gave an objective opinion about the topic in question and understood the gist of an event which could turn out to be a historical one.
The time investment in getting prepared by Palihapitiya and his communication team led to an understanding of the pulse and moods surrounding what was happening. The monitoring and analysis of social media mentions were what placed him in sharp contrast to his colleagues.
If the PR and communication teams of his colleagues had prepared similarly, they would have saved themselves the inconvenience and also protected their clients from some degree of reputational damages.
How to act amidst a communication crisis
When we are in the eye of the communication crisis storm, our evaluation of the situation and public messages should be based on objective information. The constant analysis and monitoring of public opinion, not just on traditional media, but also on social media, is of key importance for properly handling reputational challenges.
The main instruments, needed by marketing and PR professionals in such a situation are:
- Comprehensive media monitoring and analysis.
Firstly, you should be following the conversations’ pulse on the topic and cover all the possible aspects such as mentions on traditional media, blogs, and social networks. After you have painted a full picture of the conversation, what provoked it and where it is happening, it is a good idea to thoroughly analyse the data and extract as much knowledge as possible from it.
- An opportunity to follow the tone of communication.
Following the tone of the public conversation during a crisis, and in general, is of key importance to every brand. It is important to be able to catch where the negative sentiments are rising, to devise a structured and correct strategy for dealing with the negative consequences.
At Perceptica we are working with proven media analysts, who are capable of providing you with a comprehensive package of media monitoring and analysis based on a set of keywords. For us to deliver the maximum value, we have a media monitoring platform for our clients, where they have access to follow tradition and social media conversation about themselves, their competitors, or even the industry as a whole.
We also have some news: Currently, we are at the last test phase and very soon we will be able to provide automated sentiment on our platform, which shows the tone of the conversation of each article or mention.
And one more thing. Bulgaria is not our limit. We are a provider of media monitoring and analysis for the entirety of Southeastern Europe.
Have you used media monitoring and analysis before when facing delicate situations? We would happy to hear more about your experience.