Yelp Investor Says Shares Could Almost Double, Urges Changes

(Bloomberg) -- One of Yelp Inc.’s largest investors thinks the user-review website’s shares could almost double and is prepared to launch a proxy fight if the company doesn’t follow its recommendations to improve performance.

SQN Investors LP, a technology-focused investment firm that says it owns more than 4 percent of Yelp, said in a presentation that the company could create significant value for investors either by fixing its problems or by selling itself.

Yelp’s shares could soar to $65 apiece and it could return $500 million to investors if it stayed independent and implemented SQN’s suggestions, the firm said. Yelp’s shares climbed as much as 5.3 percent Wednesday. They were up 2.1 percent to $35.69 at 12:15 p.m. in New York trading, giving the company a market value of almost $3 billion.

San Francisco-based Yelp should partner with companies like ANGI Homeservices Inc. or GrubHub Inc. to drive growth and improve the revenue it receives per visitor, SQN said. It also wants Yelp to rein in its expenses, among other measures.

“We continue to believe Yelp has great potential to deliver significant value for its investors,” Amish Mehta, founder of SQN Investors, said in the statement. “After years of Yelp underperformance, we have lost patience and believe the board needs fresh perspectives and stockholder representation.”

Alternatively, SQN argues Yelp could fetch as much as $50 a share in a sale, Mehta said. There would be a large group of potential bidders, including strategic buyers and those seeking to leverage Yelp’s database of local reviews, he said. Potential suitors could range from rivals such as TripAdvisor Inc. to Amazon.com Inc. or Facebook Inc., Mehta said.

Private equity firms may also be interested in the company, he said.

Board ‘Engaged’

Yelp said in a statement it was focused on taking actions to deliver on its strategy and achieve sustained, long-term growth to create shareholder value.

“Yelp is open to hearing any ideas and investor input, including from SQN,” it said in the statement. “We remain willing and open to meeting with SQN to hear their perspectives on the topics they have previously raised, all of which are items on which the board has already been engaged.”

The company said it looked forward to continuing the discussions with SQN. It’s also working with a firm to help identify additional board candidates, according to the statement.

Shares in Yelp had fallen about 23 percent over the past year through Tuesday. Analysts hit the stock with downgrades in November after it warned that growth was likely to continue to slow.

Yelp has a staggered board, which means only three of its eight directors will stand for re-election this year. SQN is prepared to nominate three directors of its own if the company doesn’t enact its proposed changes.

‘Not Activists’

“While we are not activists, and prefer to work constructively with Yelp on the reconstitution of its board, we are prepared to take our recommendations directly to stockholders to seek their support,” Mehta said in the statement Wednesday.

SQN started to agitate for changes at Yelp in December, calling for the company to refresh its board and launch a strategic review. Yelp said at the time it was committed to keeping an open dialogue with SQN and that it has a strong strategy in place.

Redwood City, California-based SQN, which was launched in 2014, oversees about $1.1 billion in assets.

To contact the reporter on this story: Scott Deveau in New York at sdeveau2@bloomberg.net

To contact the editors responsible for this story: Elizabeth Fournier at efournier5@bloomberg.net, Michael Hytha

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