By Stuart Manning
Yelp, the Website that offers customer-penned reviews of restaurants, hotels and more, expects to raise its shares to debut in the market at $12 to $14 each, with which the company would be valued at around $840 million.
In a regulatory filing this week, Yelp said that it expects to raise about $100 million in its initial public offering (IPO) of over 7.1 million shares. Its charitable foundation will sell 50,000 shares in the IPO, that is slated for early next month.
The plan is to sell nearly 12 per cent of the close to 60 million outstanding total shares. However, some analysts think that $840 million is an over-valuation of the firm. Wedbush Securities analyst Michael Pachter said, "It's impossible because they don't make any money. The free service to consumers is great, but they're also offering free services to businesses."
Wedbush pointed out the problem with Yelp's business model as that it overcharges companies for ad impressions on the site, saying that just 2.6 per cent of the 606,000 small businesses that maintain their Yelp profiles, spend on it. Instead, most firms featured on the Website have basic, free pages.
The valuation, said Patcher, could have been inflated by earlier reports that Google wanted to acquire Yelp for $500 million. But the fact still stood that Yelp has enormous growth potential, he said. "I don't know what investors are going to do, but I personally think they have a ton of brand equity. I think they ultimately will have success."
Shares of the San Fransisco-based company are expected to be traded on the New York Stock Exchange under the ticker symbol YELP.
Yelp started making the move towards an IPO in November, even though its 2011 net loss surged to $16.7 million from $9.6 million from the year before. Founded in 2004, Yelp said that in 2011, it had 66 million unique monthly visitors.
