Yelp Investor Applauds New Board, But Doesn't Rule Out a Sale

(Bloomberg) -- One of Yelp Inc.’s biggest investors applauded recent changes made by the local search provider, but still didn’t entirely rule out a sale of the company eventually.

SQN Investors, which holds more than a 4 percent stake in Yelp, said Thursday that it’s pleased with the company’s three new board members. The fund also supports the company’s plans to build more meaningful partnerships, which could open the door for potential collaboration with ANGI Homeservices Inc. The technology-focused investment firm scrapped an effort to nominate director candidates for election at Yelp’s next annual meeting.

"We sincerely hope that Yelp’s recent announcements represent a true commitment to change as opposed to merely defensive maneuvers and hollow promises designed to deflect shareholder pressure," SQN Investors founder Amish Mehta said in a letter. "We are not typically activist investors, but in this situation, we believe our public actions have yielded positive results."

The letter applauded Yelp’s reduction in marketing spending as a small step towards improving profitability and its plan to buy back $500 million of shares.

Mehta said that there are still a couple of recommendations he would like to see the user-review company implement, including the evaluation of executive leadership and their direct reports by the board. And he hasn’t taken a sale completely off the table.

“The new board of Yelp will need to be objective in asking the crucial question of whether the company can actually deliver on its publicly announced targets and remain a viable standalone public company,” Mehta wrote. “Much work remains to achieve what Yelp has announced and the new board may conclude that Yelp shareholders would be better served if the company were sold.”

In January, SQN Investors threatened to launch a proxy fight against Yelp if it didn’t follow recommendations to improve performance or consider selling itself. The firm had argued that Yelp could fetch as much as $50 a share in a sale, with potential suitors ranging from TripAdvisor Inc. to Amazon.com Inc. or Facebook Inc.

Yelp shares fell about 0.7 percent to $35.69 in New York at 11:41 a.m. A spokeswoman for the company declined to comment on the letter.

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