Trustpilot shares rebound after short seller attacks ‘mafia-style’ practices
Consumer review website Trustpilot has seen its share price rebound after being forced to deny allegations from a US short-selling firm that likened its business model to a ‘mafia-style extortion racket’.
Shares rose 9.7 per cent in early morning trading to 141.8p, bouncing back after £200m was wiped off the company’s market value yesterday following the claims from Grizzly Research.
The American firm alleged that the FTSE 250 company effectively coerces businesses into signing up for membership by “creating unsolicited review profiles” with the intention of attracting “hyper negative reviews”, forcing businesses to pay for subscription deals.
Report on Trustpilot shares
In a 26-page report published on Thursday, first reported in The Times, the US trading firm said: “We believe that the public will increasingly wake up to the fact that Trustpilot has traded the integrity of reviews for revenues.
“We see this resulting in a rapid depreciation of the Trustpilot brand and its fundamental value proposition.”
Grizzly said it found evidence that companies suddenly saw their Trustpilot ratings “magically lift” from two stars out of five to four stars out of five.
Meanwhile, the group claimed genuine negative scores of premium members were “challenged or removed”.
Trustpilot released a statement hours later, dismissing the claims as “selective, misleading and framed to support a predetermined narrative”.
However, the share price suffered, dropping 31.4 per cent to 130.1p on Thursday following publication.
Copenhagen-based Trustpilot, which floated in London in 2021, makes money from selling companies a way to monitor and interact with customer reviews on its site.
Short seller play
Short sellers, such as Grizzly, profit by borrowing shares and then selling them, in the hope that the price will drop so they can repurchase them at a lower price and return them to their owner.
Grizzly describes itself as a research team of accountants, economists and engineers based in the US.
The firm was founded by Siegfried Eggert in 2020, a German national based in the US.
Grizzly has opened eight other positions this year, including against food delivery group HelloFresh, confectionery group The Hershey Company, and US thermal energy turned bitcoin purchaser KULR Technology.
One target, Brazilian fintech XP, filed a lawsuit in the US in July accusing Grizzly of false and defamatory statements when it accused XP of operating a “Madoff-like Ponzi scheme”.
But, Grizzly said it stood behind its report and its accuracy last month.
The firm also did not disclose the size of its position in Trustpilot.