Over the past few months we've watched a strange new battle unfold between large hedge funds and retail investors. The subject of that battle: GameStop, an American video games retailer.
What is happening on Wall Street? At first glance, a handful of people found a way to rebel against a corporation. That's an oversimplification - behind that sentence sit billions of dollars, the investment instincts of "ordinary" people, automated trading algorithms, and the lingering memory of an entire generation still recovering from the 2008 financial crisis.
How one trade on the NYSE became the symbol of a global movement
A large hedge fund tried to short the shares of a struggling company. A man from Boston saw what was happening and started buying, positioning himself against the hedge fund over the course of a year. Thanks to modern communication channels, this stirred others across the US to express their dissatisfaction with the way large companies operate on the stock exchange - and they followed suit, buying shares.
When the story - until then a niche conversation on a Reddit forum - hit the global news cycle, media everywhere ran with it. The wave became a tsunami. People from Wellington to Amsterdam, London to Los Angeles, declared support by buying GameStop shares. The result: a temporary ban on buying the shares of 14 companies on a number of retail platforms, including Robinhood.
The toothpaste was already out of the tube - and no one could put it back in. Companies turned to PR experts to salvage their reputations.
Lesson 1: Being upfront with your clients pays off
Clients and employees do not like feeling betrayed or lied to - especially when it concerns the money they invest. When Robinhood halted buying on its platform, the company that had promised to democratise access to the markets left its users with a sour taste in the mouth and a vague explanation that came across as an insult.
Robinhood explained that it had halted buying "for the good of their clients" - which, to clients, translated as "you just don't get it". Later, a more coherent explanation appeared on the company's blog, but by then it was too late to turn public perception around. The reality - that Robinhood needed to accumulate capital to ensure liquidity in a bizarre situation - never landed.
On the Reddit forums, that nuance didn't matter. Everyone who felt part of a movement had already cast Robinhood as the Sheriff of Nottingham. Whole manuals on how to migrate one's portfolio to a competitor began circulating. Even if the impact wasn't catastrophic, the reluctance to communicate openly amid an explosive situation could lead to serious losses in market share and reputation.
All of this 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 current know that traditional media isn't the only valuable channel. What is happening on Twitter, on forums and on Facebook is just as essential. That's why media monitoring and analysis tools have been adopted by more and more PR teams who'd rather stay ahead of events.
Lesson 2: Be prepared before speaking
Given how unique and fast-moving the situation was - and how few people genuinely understood it - the press turned to experts. Those interviews showed there's a substantial difference between being an expert in your field and being an expert who is also aware of the context.
The bad example: CNBC invited billionaire investor Leon Cooperman, who said on 25 January 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 could, claiming the situation was not a result of their investment instincts but pure coincidence - and a "coordinated attack on wealthy people". Looking at the interview alongside social media mentions, it's clear his communications team hadn't even glanced at the conversation. They left their client at the mercy of fate.
On the other end of the spectrum was Chamath Palihapitiya, a famous proponent of Bitcoin and a billionaire investor - and one of the few to demonstrate an efficient, proactive 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 he'd followed the Reddit conversation for several days to familiarise himself with the language and tone users were using. That preparation showed: he and his team understood the importance of being informed in the context of the conversation. From sentiment to expressed user needs, that grounding positioned him as one of the few voices to give an objective opinion about a moment that may turn out to be historic.
If his peers' PR and communications teams had prepared similarly, they would have saved themselves the inconvenience - and protected their clients from real reputational damage.
How to act in the middle of a communication crisis
When you're in the eye of a communication crisis, your read of the situation and your public messages should be based on objective information. The constant analysis and monitoring of public opinion - not only on traditional media, but on social as well - is essential for handling reputational challenges properly.
The main instruments PR and marketing professionals need in such a situation:
Comprehensive media monitoring and analysis
Follow the pulse of the conversation across all relevant aspects: traditional media, blogs and social networks. Once you've painted a full picture of what's being said, what triggered it, and where it's happening, analyse the data thoroughly and extract as much knowledge as possible.
An opportunity to follow the tone of communication
Following the tone of the public conversation - during a crisis and in general - is critical for every brand. Catching where negative sentiment is rising lets you devise a structured, correct strategy for dealing with the consequences before they compound.
At Perceptica we work with proven media analysts who provide a comprehensive package of media monitoring and analysis based on a set of keywords. To deliver maximum value, we offer clients a media monitoring platform with access to traditional and social conversation about themselves, their competitors, or the industry as a whole. And one more thing - we cover all of Southeastern Europe, not just Bulgaria.
Have you used media monitoring and analysis to navigate a delicate situation? We'd love to hear about your experience.