What the short seller attack on Trustpilot teaches us about reputation management
The temptation when accused of a 'mafia-style extortion campaign' is to shout. Trustpilot shows us how to respond in crisis and regain financial loss.
There is a particular, visceral nastiness to waking up and finding oneself the subject of a short seller report. I first faced a crisis of this nature a few years ago, following a peaceful family holiday break, to enter the London office facing rattled client calls. David Oman frames this sort of situation well in his book on ‘How to Survive a Crisis’. As a Former Director of GCHQ, this type of short seller attack could be known as a “sudden impact” crisis – to quote,
“… an abnormal and unstable situation that threatens an organization’s strategic objectives, reputation or viability”
Among client conversations and internal team discussions, I can tell you that the initial reaction to the financial violence isn’t fear, but a profound sense of offense. Without divulging the details of my first taste of short seller attack, often an organisation’s first reaction is the desire to drag the accuser into the public square and flay them with facts. For short sellers though, this is a mistake and a misjudgement of their character; they rely on narratives that drive a belief that a stock’s price is destined to fall.
Giving oxygen to this flame, say through an in-depth rebuttal, only acts to fuel the initial accusations. The objective is to lower the stock and then buy back shares at a lower price – a process known as “covering” – to profit from the difference. A short seller does not seek a debate; they seek a profit. Beyond financial value to reputational value, it only takes 10 seconds to smear a reputation, and 10 months to scrub the wall clean.
This is a grim theatre that began playing out last week when Grizzly Research, a short seller led by Siegfried Eggert, released a report accusing the FTSE 100 firm Trustpilot of operating a “mafia-style extortion campaign”. My own principles refrain me from directly linking to the report from this humble Substack, as arguments made are a classic of this short seller genre.
The assault on Trustpilot
The report was conspiratorial, laced with the sort of hyperbolic adjectives that usually signal a weak argument, collecting a small number of examples to claim Trustpilot actively courts fake negative reviews to bully businesses into paying for subscriptions; a “pay-to-play” racket. The examples provided weren’t representative of Trustpilot’s size: 330 million active reviewers and 60 million monthly active users.
Trustpilot responded within hours,
“The Report presents a series of claims that are selective, misleading and framed to support a predetermined narrative. It omits key context and publicly available facts, creating a false impression and exhibits a lack of understanding of how Trustpilot works. Trust is our guiding principle and is central to everything we do.”
More importantly, the directors put their own capital on the line. CEO Adrian Blair, Chair Zillah Byng-Thorne, and CFO Hanno Damm all bought shares in the immediate aftermath. This further signalled confidence in the business.
The Trustpilot response offers a textbook study in strategic communications during a crisis of confidence. The temptation, when accused of being a “mafia” operation, is to shout. As I wrote earlier, one wants to issue a 50-page line-by-line rebuttal. But the strategic communicator knows that to do so is to grant the aggressor the status of a peer. By responding to every point, you legitimise the claims. You accept the premise that you are on trial.
Trustpilot avoided this trap. They denied the central thesis with brevity and then went back to work. The share purchases were the real communication.
In my own experience, the most vital lesson is to distinguish between the noise of the market and the signal of the business. The short seller relies on the “short and distort” tactic: take a kernel of complexity (e.g. Trustpilot’s open platform allows anyone to post, which naturally includes some bad actors), strip it of context, and present it as a systemic fraud.
The antidote is not to argue the complexity, but to demonstrate the simplicity of the value. Trustpilot is the standard for online trust; if it were truly a criminal enterprise, one suspects its millions of users and the scrutiny of the London Stock Exchange might have noticed before Grizzly Research arrived.
Trust is reputation, especially when it’s in your name
The Trustpilot share price has already begun to rebound, suggesting that the market’s immune system is functioning. Trustpilot plays a significant role in portraying the perceived reputations of companies in Google Search and in Generative AI results – so this crisis strikes at the heart of their business model.
The long-term imperative for Trustpilot is to further shed light on how they operate, work to correct bad actors seeking to manipulate the platform, and demonstrate that businesses that pay receive support but not manipulation. Trustpilot is a business well-positioned for sustainable growth, even more so given how Generative AI is changing online journeys.
… and in case you’re wondering, Trustpilot is not a client. Well done to their communications team and any agency that may have been supporting.