Trustpilot results overshadowed by SVB exposure

Recent events suggest that the financing window for tech companies could conceivably narrow as we move forward. Trustpilot (TRST), an online review platform founded in 2007, burnt through roughly $12mn (£10mn) in 2022, but potential investors would have been more interested to learn that it had $36mn tied up with Silicon Valley Bank’s UK entity, of which two-thirds was “immediately accessible”.

The fact that HSBC (HSBA) has stepped in to support SVB’s UK subsidiary provides a degree of reassurance, but whether it remains Trustpilot’s “principal banking partner” is open to question. Presumably, HSBC will conduct a risk assessment of the businesses it has indirectly taken under its wing, so any investment decision needs to be taken in that context, although a simple depositary relationship is less problematic.

We originally reviewed the activities of Trustpilot a year ago, when it was struggling with “spiralling costs from wage inflation and one-off listing expenses”, along with issues linked to fake reviews on its site – a much wider problem, to be fair. A year on, and the platform’s total cumulative reviews have increased by 27 per cent to 213mn, while the number of active domains eclipsed 100,000 for the first time. More importantly, the company expects adjusted Ebitda profitability and positive adjusted free cash flow this year.

Separately, Peter Holten Mühlmann, the company’s founder and chief executive, has indicated that he wishes to transition into the role of founder and non-executive director where he will be an “evangelist and brand ambassador”. 

Leaving aside any banking uncertainties, the online platforms that have proved profitable are those with a truly differentiated offering and Trustpilot operates in a somewhat crowded space. HSBC may well be swayed by the company’s immediate financial prospects, but given ‘blue-sky’ uncertainties we do not share the outgoing chief executive’s apparent religious zeal. Hold.