When a Reddit message board decided to short squeeze Wall Street hedge funds in an unprecedented trading frenzy of digital protest, brands such as GameStop, AMC and Blackberry got caught in the crossfire.
In a roller coaster ride, GameStop shares have skyrocketed over the last week, catapulting the video game retailer's valuation to nearly $20 billion, a 14-fold increase from just a month ago, before plunging on Thursday and rebounding strongly on Friday. Ultimately, shares of GameStop ended the week up 400%.
While Reddit users cheered and hedge funds like Melvin Capital grumbled, brands were left wondering when the other shoe would drop.
Comms professionals see opportunity for companies like GameStop and AMC.
Jason Mandell, cofounder of LaunchSquad, thinks GameStop should lean in and take advantage of how people are talking about the company.
"As a brick and mortar retail, GameStop has been a survivor of sorts, and they have a story to tell," Mandell says. "They need to get out there and talk about why it's an interesting company that has a bright future regardless of what the stock price is."
Mandell suggests identifying reporters and earned media opportunities who will tell the company's authentic story beyond merely asking for a comment.
Bryan Specht, group president at W2O Group, suggests celebrating this grassroots advocacy by doubling down in places like Reddit and Twitch through livestream interviews, paid partnerships and created content.
"[The company should] seize the moment to increase GameStop’s online and social presence, not to mention the company’s ecommerce footing, especially as the pandemic lingers and their brick and mortar stores face more dark days, Specht said.
Internal communications will be just as important as external, according to Jeff Lambert, CEO of IR firm Lambert and founder of Tiicker.
"Your first focus needs to be on your internal audiences," he said. "Make sure that everyone understands what's going on from the storefront employee who is getting questions from consumers to corporate and then to the investment community."
Long-time institutional investors are an important facet of this situation and they shouldn't be overlooked because they may get caught up in the feeding frenzy and sell for profits.
"You want to court those long investors to hang on," Lambert said. "You tell them, 'Nothing is different about our fundamentals, but we appreciate you and we want you to stick around.'"
The Reddit-driven rollercoaster ride for these legacy brands’ share prices has also provoked the ire of hedge fund managers and financial professionals. Leon Cooperman, chairman and CEO of hedge fund Omega Advisors, said on CNBC that the situation was driven by “people sitting at home getting their checks from the government.” Conversely, celebrities, activists and regular people reacted with anger after Robinhood shut down trading of GameStop on Thursday.
Coms experts note that projecting confidence from the C-suite executives of legacy brands will go a long way to holding on to long and short investors.
"CEOs need to show how certain they are that their companies will get through this stronger because they have the situation under control," Mandell said.
Typically, investor relations departments don’t pay much attention to short sellers but Lambert suggests finding ways to entice some to stick around and become consumers.
"These companies got millions of new consumer prospects, so I would invite these new shareholders to be customers by offering stock perks like discounts," he said. "It may seem counterintuitive, but ignoring the volatility could convert shareholders into loyal customers."
All three communicators agree on one thing: steer away from the word “stock” in all messaging.
"I would say we appreciate all the awareness that this has brought our company, and we’re excited about the coming year when we reopen theaters, launch a product or offer a new game console," Lambert says. "Turn that microphone to the world and broadcast the good things that are going on at the company, but it'd be about the company and not about the stock."
In the aftermath, businesses should use grassroots resistance movements like this as a warning, according to Specht.
"It's a cautionary tale in how one frames and messages tactics like shorting stocks and the implications for businesses with a strong brand category or following," he said. "More importantly, it’s a signal to regulators that we need to look at some reforms to avoid artificial value inflation as there aren’t going to be many winners when this is all said and done."