Whether or not Yelp Inc. (NYSE: YELP) should be considered a social media company is something we will leave up to you. What it has in common is simple: a huge lockup expiration where insiders and backers can suddenly unload millions and millions of shares. Yelp has been a success story since its initial public offering in March, as the $15 IPO more than doubled before sliding back down into the teens. What is interesting is that Yelp shares were in the red again this morning, but then came a sudden rise in the stock.
Wednesday’s trading session marks the end of the lockup period on shares held by venture investors, company managers and vested employees. If every single one of those shares were unloaded, something that never happens at once nor in the entirety, another 52.7 million shares could hit the market. In short, the float could be tripled. Recent lockup expirations from Facebook Inc. (NASDAQ: FB), Groupon Inc. (NASDAQ: GRPN) and Zynga Inc. (NASDAQ: ZNGA) have weighed on shares, and the big concern is that another 1.7 billion shares of Facebook stock are still coming up in a second lockup expiration.
Yelp did at least have a good quarterly earnings report, as revenue rose by 67%. Yelp also raised its expectations, something unheard of by these other Web 2.0 (or 3.0) peers.
In Tuesday’s trading, the company’s stock price was down by over 4% at $18.26. Shares were down 3% in early premarket trading, but now the stock is up by 7.5% at $19.63 against a post-IPO range of $14.10 to $31.96.
One issue that may be helping is that we have yet to see Form 4 filings, which would be indicative of formal share trades taking place. Be advised that those filings can still hit today, tomorrow and Friday.
JON C. OGG