Yelp Files to Raise $100M in IPO

By Douglas MacMillan - Nov 18, 2011 5:51 AM GMT+0700
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Existing Yelp shareholders intend to offer stock in the IPO, according to the document, which didn’t offer further elaboration. Photographer: Scott Eells/Bloomberg

Yelp Inc., a site featuring user reviews of restaurants and businesses, filed to raise as much as $100 million in a 2012 initial public offering, seeking to become the latest unprofitable Internet company to go public.

San Francisco-based Yelp will use its name as a ticker, and didn’t disclose how many shares it will offer or at what price. The $100 million dollar amount is typically used as a placeholder to calculate fees and may be subject to change.

Yelp, co-founded by former PayPal Inc. executive Jeremy Stoppelman in 2004, would follow the IPOs of daily-deal leader Groupon Inc. and service-review site Angie’s List Inc. this month. Like those companies, Yelp isn’t profitable and may be hurrying to take advantage of growing investor enthusiasm toward Internet share sales, said Tom Taulli, founder of the IPOByte.com website and author of “Investing in IPOs.”

“Investors are open to taking bets on companies that are generating losses, as seen with Angie’s List and Groupon,” he said. “You don’t know how long this window is going to last, so I think Yelp is going to get out as fast as possible.”

Yelp’s sales surged 80 percent to $58.4 million in the first nine months of this year from a year earlier, the company said in the filing. Yelp’s loss attributable to shareholders narrowed to $7.76 million in the period, from $8.59 million a year earlier. It doesn’t expect to be profitable in the near term, partly due to investments in product development, according to the filing.

Losses Narrow

The website has more than 22 million reviews of everything from salons to dentists, created by its 61.1 million users.

Groupon’s IPO raised $700 million on Nov. 3, generating 30 percent more than the company originally sought. The shares have climbed 24 percent. Angie’s List, which began trading on the Nasdaq Stock Market today, surged 25 percent in its debut. The company priced its $114 million IPO at the high end of the marketed range.

Yelp faces competition from Google Inc., Facebook Inc. and Yahoo! Inc., which also sell online ads to local businesses, the company said in its filing. Yelp relies on these rivals for sending visitors to its site, particularly Google, which accounted for more than half of Yelp’s search-engine traffic in the first nine months of this year.

Google’s dual role as both competitor and ally may put Yelp in a difficult position in the future, Taulli said.

Rival Causes ‘Concern’

“Their main source of customers is coming from their competitor,” Taulli said. “For a long-term investor, that is a concern, as Google gets stronger and stronger and puts more resources into this market.”

Goldman Sachs Group Inc. (GS) is leading the deal, with Citigroup Inc. (C) and Jefferies Group Inc. helping manage. Allen & Co. and Oppenheimer & Co. also are working on the offering. Existing Yelp shareholders intend to offer stock in the IPO, according to the filing, which didn’t elaborate.

Yelp’s venture backers include Bessemer Venture Partners, Elevation Partners and Benchmark Capital.

Yelp is scaling back a foray into the daily-deal business, where it competes with Groupon. Yelp is cutting its sales staff dedicated to the effort, Yelp Deals, by half, moving about 15 salespeople to other areas of the business, the company said in August.

In July, Yelp hired Rob Krolik as chief financial officer, citing his experience at public companies. Krolik was finance chief at Move Inc. (MOVE), an online real-estate company, and CFO at Shopping.com, where he played an “instrumental role” in the company’s IPO and then its sale to EBay Inc. (EBAY) in 2005, Yelp said.

To contact the reporter on this story: Douglas MacMillan in San Francisco at dmacmillan3@bloomberg.net

To contact the editor responsible for this story: Jennifer Sondag at jsondag@bloomberg.net