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Details Regarding The Yelp IPO

The Yelp IPO Is Attracting Heavy-Weight Attention

Yelp IPOThe Yelp IPO, which is expected to occur in 2012, is going to have a lot of competition to contend with.  Not only will Yelp be doing their Initial Public Offering (IPO) in the shadow of the towering Facebook IPO; according to financial industry advisors, the 2012 IPO market has the more pending IPOs (greater than 200) than has been seen since the Internet boom of the late 1990s.  In such a crowded 2012 IPO field, it could be difficult for the Yelp IPO to gain attention and traction.  However, many analysts believe the Yelp IPO will big one of the biggest Internet IPOs of 2012, so it is worth following developments in the Yelp IPO.

Yelp, which runs a web portal that allows users to write their own reviews on a variety of products, services, and local businesses, is hoping to turn their Internet niche into a successful Yelp IPO that could raise upwards of $100 Million, which would give Yelp a valuation of between $1 and $2 Billion.  Although Yelp’s online review business sounds like a light-weight business to be in, the Yelp IPO is attracting heavy-weight investment bankers to manage the IPO, including Jefferies and Goldman Sachs as the lead IPO underwriters.

The Financial Outlook For The Yelp IPO

The financial outlook for the Yelp IPO is not as strong as many other Internet companies that have gone public via IPOs in recent years.  Yelp is currently losing money.  Financial figures released by Yelp indicate that over the first nine months of 2011 the company had $58.4 Million of revenues, which resulted in a loss of $7.4 Million.  During the first nine months of 2010, Yelp’s revenues were $32.5 Million, which resulted in a loss of $8.5 Million.  While revenues were up significantly over the same period from 2010 to 2011, Yelp’s losses were only reduced marginally from 2010 to 2011.  The Yelp IPO may not be perceived by market participants as the high growth IPO story that entices many investors to buy into stocks during or shortly after the IPO.

One problem that Yelp has regarding their forward business model and the Yelp IPO is that unlike a company such as Facebook, Yelp does not dominate the sector of the Internet that it operates in.  The local online review space is a crowded sector of the Internet, with big league players, such as Yahoo and Google, firmly entrenched in this space, and other similar competitors, such as, vying for the same customers and users as Yelp is aiming trying to attract.  While Yelp dominates local search and reviews in some markets, such as the San Francisco market, the web portal’s presence is not nearly as visible in many other important markets throughout the United States.

Yelp has a long way to go to claim dominance in the local online review space, which means buying into the Yelp IPO in 2012 is a highly speculative proposition.  The Yelp IPO may be a sign that the new wave of Internet IPOs is reaching maturity, with marginal young Internet companies, such as Yelp, trying to tap the IPO market.

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