Trustpilot surges on Morgan Stanley upgrade despite short seller claims

Dec 5 (Reuters) - Trustpilot shares surged 16% after Morgan Stanley upgraded the stock by two notches to "overweight" on Friday, a day after U.S. short seller Grizzly Research took aim at the global review platform.

"We think the market is underappreciating Trustpilot's multi-year growth and margin story," Morgan Stanley analyst Mark Hyatt said, as he upgraded the stock from "underweight".

Trustpilot shares fell more than 30% on Thursday after Grizzly Research alleged that the platform created unsolicited profiles that gave negative reviews to coerce businesses into paying for subscriptions.

The company denied the claims, saying "(The report) omits key context and publicly available facts, creating a false impression ... of how Trustpilot works".

Trustpilot shares reversed some of Thursday's losses and were up 15.6% at 149.3 pence by 1223 GMT. They have fallen about 51% so far this year.

Hyatt said Trustpilot's share decline reflects a shift toward valuing the firm's operating leverage, rather than concerns of AI disruption or its business model.

Morgan Stanley added that its proprietary human review data is becoming increasingly valuable in an era of agent-driven commerce.

Morgan Stanley, however, cut the price target on the company's stock to 275 pence from 315 pence.

($1 = 0.7495 pounds)

(Reporting by Yamini Kalia in Bengaluru; Editing by Anil D'Silva)