Robinhood, Can They Still Be Trusted?

 

The company I will be discussing in this post is non other than Robinhood. Robinhood is a company that we have all heard quite a lot about in the last few years. They started out as a brand new online brokerage that was utilizing FinTech, (which is a developing technology that allows online payment and money transfer) in order to give their clients a simple, free, and easy to use brokerage on their smartphone. 

Robinhood's value proposition is that they are for the people and that they want to help retail traders take their place in the stock market by allowing easy and affordable access. Their name itself represents take from the rich and giving to the poor. They claim they are just trying to give more opportunity for equality to their clients.

The reason there has been so much buzz social media about Robinhood in the last few months is because a lot of people believe that they have not lived up to the values and morals they claim to have. This is because there was a recent situation in which many of their client felt like they got the short end of the stick and that Robinhood caved to pressure from hedge funds with short positions on several very volatile stocks. After Robinhood became concerned that a short squeeze would happen with the the specific stocks, they changed their setting so that clients could only sell shares of those particular stocks and not buy them. This artificially drove the price down because it meant shares were only sold making them appear less valuable.

Retail investors took to social media to air their frustration about the situation, specifically reddit users. Many of those reddit users feel that the brokerage supposed to be on their side betrayed them. Robinhood works closely with another company that also owns a large percent of the equity in one of the major hedge funds. The theory is that company leveraged Robinhood into halting their clients from being allowed to create buy orders. On the other hand, there are also many people on social media with the opinion that the retail investors are at fault. They believe this because the retail investors did intentionally try to create a short squeeze which is a legal grey area. There is a third separate side that believes no one acted illegally because The SEC told Robinhood the had to have way more cash than was available or they needed to halt trading. Robinhood was required to appear before congress as were a couple of the social media users on reddit who helped to instigate the situation.

 Robinhood has tried to market themselves as on the side of the retail investor and their advertisements reflect that. In several of their ads they have everyday people talk about how Robinhood has been there for them and they use storytelling to make it more relatable for the audience. This whole situation has already built a great deal of brand recognition for them but now the question they are facing is will they be able to continuing acquiring new customers or will the influence of negative publicity hold them back.

After all of the backlash, Robinhood has attempted to respond to he claims that they didn't have their client's best interest in mind, by trying to reinforce their values of wanting to represent the retail investor provide equal access to the stock market. This was the best thing they could have done and if I were in the brand managers position I would have done pretty much the same. It was important for them to recognize the resentment and loss of trust, but to also stand by the choices they made. The only thing that I would have done differently is I would have avoided having their CEO Vlad be the person taking care of customer relations. He came across as though he was hiding something and that made a lot of people suspicious.

I feel like I learned more about the entire situation that happened from this assignment. I had a lot of fun reading the reddit and twitter memes people posted while venting their opinions. I always forget how intense the internet can be and how far people push the boundaries of what's appropriate.