The GameStop situation exposed these crisis communications truths
It’s looking like 2021 might be just as unpredictable as 2020. So far this year’s got political unrest, new COVID strains, oh, and a Reddit thread about GameStop that exposed one of Wall Street’s darkest secrets – which triggered one crisis communications event after the next.
To recap, users on the r/wallstreetbets Reddit thread set the foundation for a short squeeze on GameStop, pushing the stock price up significantly. Over the course of just two weeks, GameStop’s stock value increased by 1,500%, causing trading to stop multiple times. In conjunction with the short squeeze, the increase in stock options triggered an even bigger squeeze due to market makers needing to buy shares to hedge their short exposure. With me so far?
Even after several attempts to silence the r/wallstreetbets subreddit, the thread still triggered other short squeezes on companies such as AMC Theatres, BlackBerry Limited and Nokia Corporation. In the wake of this Wall Street nightmare, brokerage platforms, such as Robinhood, haulted purchases on their platforms with no warning or explanation. This decision created mass outrage by the brokerage platform’s users, causing a frenzy of class action lawsuit threats by users on Reddit.
In an instant, the crisis evolved from financial risks to reputational ones. This event not only highlighted how the 1% controls the market, but it emphasized the importance of businesses being prepared to weather any crisis communications situation, whether self-inflicted or by pure chance.
Be prepared and listen carefully
Where to start? First, those representing Wall Street financial institutions instinctively went to the media in an attempt to discredit Reddit and its users for wanting to game (no pun intended) the system. But their actions quickly came across as tone deaf. Instead of pointing accusatory fingers, the big money playerss would have been more successful in deescalating the situation by listening more closely as to why the public was upset in the first place.
It’s an oft-repeated sin. One of the worst things you can do at the advent of a crisis is react from a self-serving standpoint before really understanding the nature of the public’s concerns. It’s critical to look objectively at the situation, and that includes some honest introspection as to your role, if any, in the episode or what led up to it. Only after you understand all sides should you begin crafting a response.
Be transparent and avoid jargon
None of Robinhood’s users were notified that the ability to buy and trade on the platform was about to hault. When its users confronted the brokerage platform, Robinhood’s founder, Vladimir Tenev, spoke to users through the media with unclear and unrelatable answers. His talking points were rife with technical jargon that everyday investors don’t understand. That kind of high-handed tone only fueled the public’s distrust.
Being upfront and speaking directly to your customers will help build some trust during a crisis situation. People want to be spoken to with respect and transparency; they don’t want to hear arcane terms or inside baseball language. Doing so comes across as overcompencating, or worse, covering something up.
Speak up and move quickly
When Robinhood failed to publicly acknowledge why it put restrictions around certain stocks on its platform in a timely manner, public mistrust grew and the story mutated.
Response time is incredibly important in a crisis situation, because it allows you to take control of the situation before outrage spins out of control. There have been too many instances where companies are reluctant to admit fault and laying low in the hope that the situation will die down. History tells us that approach only allows the scandal to grow. You’re more likely to overcome scrutiny when you proactively own up to your part in a situation, apologize and explain how you will prevent the crisis from happening again.
Generally speaking, it’s best to own up to a crisis situation and learn from it. With some listening, introspection and humility, it’s possible for your organization to prepare for, weather and come out on the other side of a crisis communications event without compounding the damage.