SQN Investors, a longtime Yelp shareholder, is gearing up to push for new board representation as the company suffers from missteps that have hurt shares of the business review service.
The Wall Street Journal, citing a letter SQN Investors plans to send to the board of Yelp, says the investor is calling on the company to consider all options including a sale to improve operations. In the letter, the hedge fund points out that it has been a shareholder of Yelp since 2015 and that it owns a stake of greater than 4 percent. That makes it one of the top five shareholders in Yelp, noted the report. The Wall Street Journal reported that in the letter SQN contends Yelp has shown a “consistent pattern of operational blunders, poor forecasting and sharp guidance revisions,” and that the company faces increased competition from the likes of Google and Facebook. SQN said in the letter that Yelp has missed earnings expectations in 12 of the last 19 quarters. The hedge fund argued the current board doesn’t hold management accountable and that new board could evaluate Yelp’s strategy and decide if it should seek a buyer or engage in other actions to turn around the company. SQN noted in the letter that it normally doesn’t engage in activist moves when calling on a company to make changes unless it meets resistance from investors, reported the Wall Street Journal.
In a statement to the WSJ over the weekend, Yelp said it has met with SQN in the past and is committed to keeping an ongoing dialogue with the investors. It also said it acts in the best interest of shareholders, employees and customers and plans to review the letter when it receives it. So far this year, shares of Yelp are down 18 percent — with shares losing as much as 28 percent in early November on the back of a quarterly earnings miss and a reduced forecast because of lower than expected ad sales.