Robinhood destroyed its reputation with almost impressive speed, almost as though it were trying to outdo the recent controversy surrounding CD Projekt Red.
ORLANDO, Fla. (PRWEB) February 24, 2021
Terry Cane, COO of SEOHost.net (https://www.seohost.net), a leading domain registration, SSL service, and SEO hosting provider, weighed in on the WallStreetBets controversy — specifically, on how democratized stock trading app Robinhood has conducted itself throughout.
A community on content aggregator and discussion community Reddit, WallStreetBets provides a forum in which its subscribers can discuss stock trading strategies and ideas. Self-described as what would happen if "4chan found a Bloomberg Terminal," it maintains a generally irreverent, sarcastic atmosphere. Many of the community's members maintain an interest in technology and the gaming industry.
As reported by The Verge, one year ago, a member of the community known as delaneydi argued that the stock price of video game retailer GameStop was underpriced. This sparked a conversation that eventually led to an event some have colloquially termed "The Stonkening."
In an effort to punish short-sellers and take revenge on Wall Street for market manipulation, the community began buying massive amounts of stock in GameStop and several other organizations.
This caused a massive surge in stock prices, with GameStop climbing from $19.41 on January 11 to a record high of $483 at closing on January 29. In response, Robinhood was one of the first stock trading apps to freeze trading on GameStop. The backlash was both immediate and severe.
"I've heard on more than one occasion it's ironic how the company named itself after Robin Hood, as it behaved more like the Sheriff of Nottingham," said Cane. "Whether or not it's true, public perception now holds that the company abandoned its stated mission the moment Wall Street stood to lose money. That it opted to cater to hedge fund managers rather than its users."
As a direct result of the controversy, multiple government agencies are now investigating the stock trading company amidst allegations of collusion. This investigation has received bipartisan support, and the company is also facing dozens of lawsuits. In addition, multiple high-profile influencers have publicly disavowed the company, including YouTuber Philip DeFranco.
"Robinhood made every mistake it could have possibly made in this situation," Cane said. "It acted in a way completely counter to its established brand identity, and then made absolutely no effort to manage the aftermath. I believe it's safe to say that, whatever else comes of this controversy, Robinhood's reputation is permanently tarnished."
According to Cane, there are two takeaways here. First, every business needs a crisis management plan for public relations disasters. Second, for every decision a business makes, it must consider how that will impact its image along with the trust placed in it by its customers.
"Robinhood may still have suffered reputational damage regardless, but it would have been far less severe had it bothered to communicate," said Cane. "Robinhood destroyed its reputation with almost impressive speed, almost as though it were trying to outdo the recent controversy surrounding CD Projekt Red."
Robinhood's CEO will testify before a House committee on Feb. 18.
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