Trustpilot IPO: Why the reviews platform is all set to float

Danish company Trustpilot has chosen to float on the London Stock Exchange in an IPO that could raise up to £500 million. So why now and how did it get to where it has?

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What is Trustpilot and how does it make money?

Based in Denmark, Trustpilot is a digital platform that invites online consumer reviews for almost any type of business and was founded in Denmark in 2007. Around one million new reviews are posted each month and businesses strive to earn a high Trustpilot rating.

Trustpilot makes money through offering various subscription services to businesses, allowing them to not only promote raw ratings data, but also to obtain marketing and analytics data from the reviews.

Subscribers using the "Trustbox" feature (which allows a website to show embedded Trustpilot reviews) can ensure only reviews with a minimum star rating will be displayed. This has led to criticisms that some consumers would necessarily and legitimately conclude that a company only attracts positive reviews.

With offices in New York, Denver, London, Copenhagen, Vilnius, Berlin and Melbourne, Trustpilot employs more than 700 people.

Why is the Trustpilot IPO going ahead?

Trustpilot is a leading player among a wave of companies offering online services who have seen their businesses expand. Coronavirus-induced lockdowns have kept people confined to home computers. The gaming sector has been particularly successful but a wide range of brands with an online-only offering have flourished.

Many of these have proceeded to IPOs. Recent floats have included The Hut Group, online greetings card retailer Moonpig and auction platform ATG. Meanwhile, Deliveroo, Virgin Wines and others are all planning IPOs.

Trustpilot is keen to sell shares to cash in on the growth that it has enjoyed. Its revenue jumped 25% last year to £73.6m million, with its losses almost halving to £8.8m. Trustpilot’s revenue streams stem from the on-trend freemium and software-as-a-service models, and it is in a good position to achieve further growth.

Founder and CEO Peter Holten Mühlmann explained in an interview with the Evening Standard why he had chosen the London Stock Exchange for the float.

“We examined a number of locations, and on balance London was the natural choice for us for a couple of reasons. The UK is one of our most important markets, and I think London is a growing tech scene. In the future I expect a lot of the significant tech IPOs will happen in London. The London stock market has a lot of liquidity, and they are exhibiting the right long term mindset on how they are looking at operating the listing rules.”

What does the Trustpilot IPO mean for the UK?

The Trustpilot IPO will help boost confidence in London’s long-cherished standing as a financial centre, being the first in the City by a company from the European Union since Brexit. Morgan Stanley and JPMorgan Chase & Co. are managing the offering, along with Berenberg and Danske Bank A/S.

Investment firms including BlackRock Inc., FIL Investments International, Caledonia Investments Plc, Capital Research Global Investors, Adelphi Capital and Janus Henderson Group Plc have agreed to collectively buy $240 million of Trustpilot stock at the IPO price, the company said last week.

How much will the Trustpilot IPO raise?

The listing is on course to raise anything between £400 and £500 million pounds. If realised, the sale could bring the UK its biggest ever first quarter for initial public offerings. That in itself would be fairly remarkable given the challenges Britain is facing with continued lockdowns and the post-Brexit landscape.

Companies have raised £4.8 billion this year through IPOs in the UK capital, according to data compiled by Bloomberg. New offerings from Trustpilot, Deliveroo and others – should they come in on time - could lift the total above the first-quarter record of £6.4 billion set in 2006.

Shares will be offered at 250 pence to 265 pence each, according to Bloomberg News. Shareholders plan to sell as much as £387 million of existing stock in the IPO, while Trustpilot itself aims to offer £47 million of stock. The IPO could raise even more funds depending on exactly how much of their shareholding existing investors are prepared to sell.

Is Trustpilot profitable?

Trustpilot does not currently turn a profit. However, in 2020 it cut its losses considerably, by a shade under 50%. Should its 2021 figures replicate last year’s it will be very close to breaking even and it would then be on course to turn a profit in 2022.

Who are Trustpilot’s competitors?

Google Customer Reviews is designed to gather feedback from a business’s customers, in the same way that Trustpilot does. It is particularly useful for businesses that wish to have star ratings appear in Google Maps and in other search results.

However, as part of the behemoth that is Google itself, it operates on a different playing field altogether.

There are few direct competitors on a global level to Trustpilot, however TripAdvisor, which dates back to 2000, is comparable in terms of scale and is a huge player when considering specifically the hospitality sector.

When is the Trustpilot IPO?

The IPO, which values Trustpilot at or even in excess of £1 billion, will run through March 22, with trading to begin the next day on the London Stock Exchange.

According to Bloomberg, the company has gathered enough investor demand to cover the full deal size throughout the stated price range within 90 minutes from the moment it starts to take investor orders. The news agency says the terms of the float indicate demand exceeds the full deal size.

Who are the directors of Trustpilot?

Peter Holten Mühlmann founded Trustpilot in 2007 and has been the main driver behind the company’s continued global expansion. As CEO, he continues to head up the company, focusing on business strategy and product development.

In 2013, he was named Danish Entrepreneur of the Year by Ernst & Young. Mühlmann has a bachelor’s degree from Aarhus University School of Business.

 Other key leadership positions:

• Chief financial officer: Hanno Damm
• Chief trust officer: Carolyn Jameson
• Chief technology officer: Stephen Garland
• Chief HR officer: Donna Murray Vilhelmsen
• Chief commercial officer: Steven Marritt
• Chief operating officer: Tim Hilpert

How can I trade Trustpilot shares?

You will be able to trade Trustpilot shares from many jurisdictions with a City Index account, just as soon as the company has completed its listing and its shares have started exchanging hands publicly.

As with a wide range of global stocks, Trustpilot shares can be easily traded through spread betting or CFD trading at City Index.

How to trade stocks at City Index

You can trade stocks with City Index using spread-bets or CFDs, with spreads from 0.1%. Follow these easy steps to start trading now.

  1. Open a City Index account or log-in if you’re already a customer.
  2. Search for the company you want to trade in our award-winning platform.
  3. Choose your position and size, and your stop and limit levels.
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