Bono firm to make $250m from leap in Yelp's shares

SHARES IN YELP leapt by 60 per cent on their market debut yesterday, the biggest one-day jump for a web company this year, as traders bet it might soon become profitable.

The business reviews website and mobile app is riding on a wave of investor enthusiasm for internet companies, sparked in part by Facebook’s probable debut this year.

Yelp’s initial public offering, which raised $107 million (€81 million), was one of four this year in the US to price above expectations, versus 11 that have priced below their initial range. But unlike LinkedIn and Zynga, Yelp loses money. Groupon and Angie’s List, other loss-making tech companies, have been weaker stock market performers since their IPOs.

Yelp’s shares priced at $15, above their projected range of $12 to $14 a share, and rose to $26 in early trading. The NYSE-listed company is on track to see the biggest one-day gain of any internet company since Zillow last July. The deal was led by Goldman Sachs, along with Citigroup and Jefferies.

Elevation Partners, the venture capital company in which U2’s Bono has an interest, stands to make $250 million on its $100 million investment in the company based on yesterday’s prices.

At the highs hit early yesterday, Yelp is valued at $1.5 billion, roughly 18 times last year’s sales of $83 million. It made a net loss of $16.7m. The company was initially priced at 10 times last year’s sales.

The hope among after-IPO buyers is the company will quickly achieve profitability. Since it was founded in 2004, Yelp has attracted 66 million monthly visitors to its service, which has 25 million reviews of restaurants and other small businesses.

Yelp’s app was also the most-downloaded from the Apple Store for local dining last year.

The company told investors it planned to grow outside the US and will continue to expand non-advertising revenue such as coupons and sales directly to businesses.– (Copyright The Financial Times Limited 2012)