Public Company Unicorn: Yelp

Yelp Inc. (NYSE: YELP) went public on February 28, 2012. Its share price on the first day of trading rose 60% and hit $23.90, putting its market cap just over $1.4 billion. Monday, Yelp’s shares traded as low as $15.50, after peaking at $98 in March 2014. Like a troubled private company unicorn, Yelp’s price has had a “down round” as far as its shareholders are concerned, a sign markets have largely lost faith in its prospects.

Yelp’s market cap is $1.2 billion. It has $375 million in cash and short-term investments on its balance sheet. From that standpoint, Yelp is worth well under $900 million. That is unusually low for a Web 2.0 public corporation. Yelp’s revenue was $550 million last year, up from $378 million the year before. Yelp lost $33 million in 2015, compared to a profit of $37 million in 2014. Revenue may have risen 55% year over year.

The current environment is punishing companies such as Facebook Inc. (NASDAQ: FB) and Amazon.com Inc. (NASDAQ: AMZN). Smaller firms, like Yelp, with much more modest prospects risk posting share prices that drop much further. Wall Street does not need to look beyond LinkedIn Corp. (NYSE: LNKD) and Twitter Inc. (NYSE: TWTR) for proof.
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As Yelp announced earnings, Jeremy Stoppelman, Yelp’s co-founder and chief executive officer, said:

We are pleased with the progress we made on the key initiatives we set at the beginning of 2015. We have evolved to a mobile-centric company and have successfully completed our transition to a performance-based advertising business. In 2016, our priorities are to continue to build our core local advertising business, further increase engagement and awareness and grow transactions. With our rich, relevant review content and highly engaged consumer traffic, we are well-positioned to capture the enormous opportunity ahead of us.

Very few people other than Stoppelman think that point of view is accurate.