Yelp shares soar on first day of trading

Shares of Yelp jumped 60 per cent on their initial public offering (IPO) Friday, the largest one-day jump for an internet company this year, according to the Financial Times.

Shares prices at $15 climbed to as much as $26, well above their predicted $12-$14 range.

The IPO for the San Francisco-based consumer reviews website and mobile app raised $107 million in the day, higher than analysts had predicted.

According to the Financial Times, Yelp is currently riding the mounting enthusiasm for internet start-ups that Facebook had sparked last month.

Yelp’s initial success mirrors that of Linkedin, Groupon and Zillow, whose stocks soared in the days after their IPOs. Yet, according to Reuters, the three companies’ stocks declined over time.

Unlike those companies, however, Yelp loses money said the Financial Times, earning a net loss of $16.7 million last year, despite over $83 million in revenue.

Despite losses, Yelp grew nearly 75 per cent last year and investors are hoping that the site will become a powerhouse in the local advertising market, from which it earns the bulk of its revenue, reported the Associated Press.

According to Forbes, Yelp’s IPO has meant that the company valuation is just over a billion dollars, making it worth 17 times its revenue.

This has some analysts worried.

“Investors clearly want companies that have a path to big growth despite the difficult economy,” said Max Wolff, senior analyst at GreenCrest Capital, in the Financial Times. “But paying much more than 10 times sales for a company without profits in a competitive environment is asking an awful lot.”

The IPO was led by Goldman Sachs, Citigroup and Jeffries.

Since its founding in 2004, Yelp has attracted 66 million monthly visitors to its site, while providing about 25 million reviews of restaurants and small businesses.

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