Yelp Shares Surge In Stock Market Debut
Yelp's stock opened to five-star reviews from investors on Friday, soaring 63 percent even though the company has yet to prove it can make money from its online recommendations.
After Yelp's initial public offering priced at $15, the shares gained $9.52 to close at $24.52 in their trading debut. In an indication of the strong investor interest in the 8-year-old reviews site, the IPO sold above its targeted range of $12 to $14 per share.
It's the biggest first-day gain for an Internet IPO since online real estate service Zillow Inc. surged 79 percent in its stock market debut last July. Yelp's gain wasn't the biggest for an IPO so far this year, though. Those bragging rights still belong to Proto Labs Inc., a Maple Plain, Minn.-based provider of customized parts. Proto Labs' shares soared 81 percent in their first day of trading a week ago.
Yelp's IPO is the latest in a series of Internet stock offerings that are serving as a prelude to Facebook's coming out party on Wall Street this spring. Facebook's IPO is expected to raise at least $5 billion and anoint the owner of the Internet's largest social network with a market value ranging from $75 billion to $100 billion.
After expenses, Yelp Inc. estimates it will get about $96 million from its IPO. The company sold 7.1 million shares and its charitable foundation another 50,000. Investment bankers also have an option sell an additional 1.07 million shares, depending on investor demand. If those shares are sold, Yelp expects net proceeds of $111.2 million.
With Friday's stock price jump, the San Francisco company has a market value of $1.47 billion. Such a big first-day jump is common, especially for high-profile Internet companies such as Yelp. LinkedIn Corp., the professional networking service, saw its stock nearly triple on its first trading day last May, reaching $122.70 after pricing at $45.
The biggest individual winners in Yelp's IPO are its chairman, Max Levchin, and its CEO and co-founder, Jeremy Stoppelman. Levchin, 36, owns 7.1 million shares now worth $175 million and Stoppelman, 34, owns 5.9 million shares now worth $145 million. Both Levchin and Stoppelman made $15 million by selling some of their stock before the IPO.
The IPO also will enrich many of Yelp's 900 employees who received stock incentives as part of their compensation packages.
Though it's best known for restaurant reviews, Yelp's users have reviewed churches, strip clubs, hospitals, hotels and high schools. The company makes money from advertising. Most of the ads come from the local businesses that its users review. In 2011, it booked revenue of $83.3 million, up 74 percent from 2010. It had a net income loss of $16.7 million last year and $9.6 million the year before. Yelp's losses since its inception total $41 million.
"Yelp's active community of users writing reviews of local businesses is difficult to replicate," said Morningstar analyst Rick Summer. "Unfortunately, the company faces challenges translating the small advertising budgets of local businesses into profitability, as about 70 percent of ad revenues are eaten up by sales and marketing expenses."
AP Technology Writer Michael Liedtke in San Francisco contributed to this report.
Also on HuffPost:Take a look through the slideshow to see how 10 tech juggernauts fared after IPO.
Apple -- $100 Million In December 1980
The technology giant raised about $100 million when it <a href="http://investor.apple.com/faq.cfm" target="_hplink">went public</a> in December 1980, <a href="http://blogs.wsj.com/deals/2011/10/06/flashback-to-apples-1980-ipo/" target="_hplink">according to <em>The Wall Street Journal</em></a>. Apple, which duels with ExxonMobile as <a href="http://techcrunch.com/2012/01/25/apple-overtakes-exxon-as-most-valuable-traded-company-in-the-world-again/" target="_hplink">the world's most valuable publicly traded company</a>, had a market value <a href="https://www.google.com/finance?q=AAPL" target="_hplink">of $426 billion as of February 1, 2012</a>.
Google -- $1.67 Billion In August 2004
According to The Washington Post, Google raised $1.67 billion in its IPO in August 2004, valuing the company at $23 billion when shares began to trade on the public market. After its first day of trading, <a href="https://www.google.com/finance?client=ob&q=NASDAQ:GOOG" target="_hplink">shares closed at $108.31</a>. As of February 1, 2012, Google has a market capitalization of $189 billion.
Microsoft -- $61 Million in March 1986
Microsoft raised $61 million in its IPO in March 1986, valuing the company at $350 million, <a href="http://features.blogs.fortune.cnn.com/2011/03/13/inside-the-deal-that-made-bill-gates-350000000/" target="_hplink">according to <em>Fortune</em></a>. As of February 1, 2012, Microsoft had a market value of $251 billion.
Netscape -- $140 Million In August 1995
<a href="http://money.cnn.com/magazines/fortune/fortune_archive/1995/09/04/205894/index.htm" target="_hplink">Netscape raised </a>$140 million ahead of its IPO in 1995. By the end of the first day of trading, the company was valued at $2.9 billion. Netscape <a href="http://news.cnet.com/2100-1032_3-1011356.html" target="_hplink">was acquired by AOL</a> (which also owns The Huffington Post) in 1998 but was effectively shut down in 2003, according to CNET. Pictured above is an image, via Flickr, of a Netscape Navigator box at the Computer History Museum.
Amazon.com -- $54 Million in May 1997
<a href="http://news.cnet.com/Amazon.com-IPO-skyrockets/2100-1001_3-279781.html" target="_hplink">CNET reports that Amazon.com</a> raised $54 million in its May 1997 IPO, valuing the online retailer at $438 million. As of Feburary 1, 2012, <a href="https://www.google.com/finance?q=amzn" target="_hplink">Amazon.com had a market value</a> of $81.5 billion.
Yahoo! -- $32.5 Million in April 1996
Yahoo! raised $32.5 million in its April 1996 IPO, <a href="http://news.cnet.com/2100-1033-209413.html" target="_hplink">CNET reports</a>. The IPO, according to a <a href="http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/1996/04/13/BU30442.DTL" target="_hplink">1996 article in the <em>San Francisco Chronicle</em></a>, valued the company $848.1 million. As of February 1, 2012, Yahoo had <a href="https://www.google.com/finance?q=NASDAQ:YHOO" target="_hplink">a market value of $19.5 billion</a>.
Groupon -- $700 Million In November 2011
Groupon, the online coupon company, raised about $700 million in its IPO in November 2011, <a href="http://www.huffingtonpost.com/2011/11/04/groupon-ipo-biggest-since-google_n_1075374.html" target="_hplink">valuing the company at $12.8 billion</a>. As of February 1, 2012, <a href="https://www.google.com/finance?client=ob&q=NASDAQ:GRPN" target="_hplink">Groupon's market capital</a> was $13.57 billion.
eBay -- $63 Million in September 1998.
The online auction site raised $63 million in its September 1998 initial public offering, <a href="http://money.cnn.com/1998/09/24/technology/ebay/" target="_hplink">CNN reports</a>, valuing the company at $1.88 billion. As of February 1, 2012, eBay <a href="http://www.google.com/finance?cid=662654" target="_hplink">had a market capitalization</a> of $41.68 billion.
Zynga - $1 Billion In December 2011
The social gaming company behind <em>FarmVille</em> and <em>Mafia Wars</em> raised around $1 billion in its initial public offering in December, valuing the company <a href="http://www.huffingtonpost.com/2011/12/16/znga-ipo-nasdaq_n_1153518.html?ref=technology" target="_hplink">at about $7 billion</a>. As of February 1, 2012, Zynga <a href="https://www.google.com/finance?q=Zynga" target="_hplink">had a market capital</a> of 7.33 billion.
Pandora -- $235 million In June 2011
Pandora, an internet radio company, raised about $235 million in its IPO in June 2011, valuing the company at $2.56 Billion, <a href="http://blogs.wsj.com/venturecapital/2011/06/14/pandora-ipo-prices-at-16-well-above-range/" target="_hplink">according to <em>The Wall Street Journal</em></a>. As of February 1, 2012, Pandora Media Inc <a href="https://www.google.com/finance?q=NYSE%3AP" target="_hplink">had a market capitalization of</a> $2.07 billion.