Reviewing Robinhood’s PR Crisis

At the beginning of the year, plenty of young people jokingly bought a small number of shares on the stock market from a failing company that was once a big corporation – GameS top. However, toward the end of January, a group of users on the social media platform Reddit joined together in buying large amounts of the company’s stock, leading to a surge in the price of said stock.

Toward the very end of January something rather unusual happened on the main trading app that many were using – Robinhood. Suddenly, the users were only allowed to sell their stock, the option to buy more was blocked when they logged in. This happened about an hour before the markets opened, and no one received any explanation about the reason behind the block.

All the app’s surprised users could do was turn to social media platforms such as Twitter and Reddit to discuss the situation while reaching out to the company itself. Unfortunately, as hours passed, there was no response from Robinhood and the public started making accusations and creating theories. The main one was that the app was actually collaborating with hedge funds who wanted to short their positions on the market and restricting the regular traders from buying more stocks and increasing their prices.

With time passing and the company officials staying quiet on the entire situation, users decided to take matters into their own hands and spammed the app with around 100,000 one-star reviews in app stores. Additionally, many users started announcing that they would be switching to using other platforms where trading isn’t blocked, and even public and political figures started questioning the company’s intentions and integrity.

Finally, that night, Robinhood’s CEO, Vlad Tenev, explained to the public while speaking to the press. Unfortunately, the company didn’t foresee this PR crisis, which would have greatly benefited from a bit more clear communication. Although the explanation from the company was found and made sense, it was tied in with a lot of technical and legal wording that the public didn’t want to hear any of it.

The reasonable explanation that the company and its CEO provided was barely heard by anyone because it actually took days for the public to receive any type of clear message. The situation that started on Thursday morning was complexly explained in an email to users that night. The next day the company published a clear blog post, but the explanation wasn’t distributed properly, so not many were informed.

Finally, it was at the start of the following week that the company finally released a well-written email that explained everything clearly and promoted the situation to the users in a faster manner. What had actually happened was the increase in stock prices meant that the clearinghouse deposits increased tenfold, which meant if the trend continued, the company wouldn’t have enough money to meet the requirements.

This means the entire problem and crisis could have been easily avoided if the company released a statement or an explanation that people understood early on when the trading block first happened.

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