Yelp shares spike on activist letter, company responds

calico 05/23/2023

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Business review website Yelp is not living up to its potential, and immediate action – including a potential sale – should be taken, activist investor TCS Capital Management said Tuesday.

“The purpose of this public letter is to express our serious concern and disappointment with the abysmal performance of Yelp’s stock price and to demand that the Board immediately explore strategic alternatives,” TCS Capital CEO Eric Semler wrote. “We believe that Yelp is shockingly undervalued and could be sold to either a strategic or private equity buyer for at least $70 per share – or more than a 120% premium to Yelp’s current stock price based on reasonable valuation assumptions.”

Shares of Yelp jumped on the developments.

Ticker	Security	Last	Change	Change %
YELP	YELP INC.	34.96	+2.44	+7.51%

While Yelp shares have gained over 30%, including today’s jump, this year, outperforming the S&P’s 9% gain, Semler said the long-term returns are “horrific.”

“We have owned shares of Yelp for most of the last five years. Over that time period, Yelp shares have declined 30% and underperformed the S&P 500 by 98%,” the letter said. “Over the last 10 years, Yelp’s share price has been flat, underperforming the S&P 500 by a staggering 208%. Amid this horrific underperformance, Yelp has become one of the most undervalued stocks that we have encountered in our 22 years as an investment firm.”

Semler also lashed out at co-founder and CEO Jeremy Stoppelman,

“Despite the stock’s poor performance, Mr. Stoppelman has remained CEO of the Company for nearly 20 years,” Semler said. “We believe he inappropriately runs the Company as his private fiefdom.”

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A Yelp spokesperson told FOX Business that “Yelp maintains an active dialogue with our shareholders and values constructive feedback on our business and ways to create value.”

Semler suggests Yelp combine with Angie’s List, which provides consumers with the names of contractors and others for services needed.

“We believe Yelp should explore a tax-free merger with Angi Inc. (“ANGI,” formerly known as Angie’s List) to form a powerhouse in the $500 billion home services market,” he added. “As a former board member and longtime investor in ANGI, I believe that a Yelp and ANGI combination would yield enormous revenue synergies and cost savings that could ultimately double the value of Yelp’s shares.”