Yelp prices IPO at $15/share, above expected range Yelp prices IPO at $15/share, above expected range
Online review site raises $107 million; shares to trade Friday morning
By Dan Gallagher, MarketWatch
SAN FRANCISCO (MarketWatch) — Yelp Inc. priced its initial public of 7.1 million shares at $15 per share late Thursday — coming in above its previously expected price range of $12-$14 per share.
Yelp
Shares of Yelp YELP0.00% are slated to begin trading on the New York Stock Exchange on Friday morning under the ticker symbol “YELP.”
The local-business-reviews site is expected to be the last significant IPO from the Internet/social networking space until the expected debut of Facebook Inc. later this year.
At its final price, Yelp’s IPO has a total value of about $107 million, though a small portion of is going to an affiliated, non-profit foundation that sold 50,000 shares in the deal. That is well below other recent high-profile Web debuts such as Zynga ZNGA+4.42% , the social game maker that raised more than $1 billion in its IPO in mid-December, and Groupon GRPN+0.21% , which raised more than $700 million in its own debut in early November.
Yelp’s pricing puts the stock more on par with Angie’s List Inc. ANGI+3.72% , which also specializes in online reviews of local merchants. That stock went public in mid-November in a deal worth about $114 million.
Facebook FB0.00% , which has not yet specified a share-count or expected price range for its offering, is widely expected to eclipse the previous debuts in terms of deal size.
Yelp provides a platform by which users can post online reviews of local businesses. The company generates revenue primarily from the sale of advertising from those merchants. The site claims about 66 million monthly unique visitors, with a total of 25 million reviews currently posted.
Total revenue for Yelp jumped to $83.3 million in 2011, up 75% from the prior year. But the company is still in the red, with net losses totaling about $16.7 million for 2011 compared with $9.6 million the previous year.
Despite its smaller size, Yelp has garnered a notable valuation, relative to its sales. The IPO price of $15 per share implies a multiple for the stock of about 10.4 times total sales for the last 12 months. Groupon, by contrast, trades about 6.4 times last year’s sales, while Angie’s List has a current multiple of about 7.3 times sales.
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Internet giant Google GOOG+0.27% , which reportedly offered more than $500 million to buy Yelp back in 2009, trades about 5.3 times past sales.
Larry Levine, managing director of the financial advisory arm of accounting firm McGladrey, said another factor helping Yelp’s debut may be the small size of the offering, which represents less than 12% of the total share outstanding expected once the deal closes.
“It does seem straight out of Econ 101 in terms of limiting supply, which adds to the complexity of figuring out the price,” Levine said.
Trading in other recent IPOs in this sector have been volatile in the weeks since the offerings. LinkedIn and Angie’s List are roughly on par with their opening price, while Groupon is down more than 30% from its own opening price on the day of its debut.
Zynga fell after its debut but has soared nearly 27% from its opening price. Analysts have pointed to a disclosure in Facebook’s IPO filing — that Zynga represents about 14% of overall revenue for Facebook — as a key fact helping the shares at their current level.
Dan Gallagher is MarketWatch's technology editor, based in San Francisco.
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