Trustpilot Group plc tanked on Thursday after short seller Grizzly Research disclosed a short position in the shares and said it had uncovered "mafia-style" extortion campaigns against non-paying businesses.
Grizzly argued in a report that the review site's "extortion model" destroys the value proposition.
"According to our investigation, Trustpilot creates unsolicited review profiles for all kinds of businesses with the intention to attract hyper-negative reviews and force these businesses into paying subscription deals to 'more actively manage' the reviews," it said. "Paid-for profiles see their review score magically lift from under 2 of 5 stars to over 4 of 5 stars. Industry experts call this scheme the 'Trustpilot Mafia'."
Grizzly said reviewers find their genuine negative reviews "spuriously challenged" or removed for companies that pay Trustpilot.
On the other hand, it found countless obviously fake positive reviews and reviewers for paying companies.
"Trustpilot is either doing a very bad job at policing their website or is willfully negligent when convenient," it said.
Grizzly said Trustpilot seems to be most appreciated by companies who run "sketchy" business models. It added that many companies that are already shut down due to fraud "are somehow still extremely highly rated on Trustpilot".
Grizzl 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 Resarch said Trustpilot always faced a fundamental conflict in its business model as a third-party review site that generates its revenues from selling subscriptions to companies.
"Trustpilot must balance the integrity of its reviews with the value they can provide to paying businesses," it said.
"We see simply not enough revenue potential in advertising or value in marketing analytics to sustain the business. We conclude Trustpilot has failed to balance this conflict, and, due to pressure to present investors with growing revenues and profits, has now gone all in on becoming the extortion racket that we describe in this report."
At 1345 GMT, Trustpilot shares were down 28% at 137p.
Trustpilot said in a statement: "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."