Yelp Investors: Shape Up Or Face Proxy Fight

SQN Investors, an investment firm that owns 4 percent of Yelp, is calling on the company to follow its recommendations to grow the business or prepare for a proxy fight.

Bloomberg, citing SQN, which is among Yelp’s biggest shareholders, reported the tech-focused investment firm thinks Yelp could nearly double, creating a lot of value for investors. The user review website operator can achieve that by either fixing its issues or putting the business up for sale, SQN indicated. “We continue to believe Yelp has great potential to deliver significant value for its investors,” Amish Mehta, founder of SQN Investors, said in a statement to Bloomberg. “After years of Yelp underperformance, we have lost patience and believe the board needs fresh perspectives and stockholder representation.”

According to SQN, shares of Yelp could hit $65 — well above its currently trading price of around $36.50 — returning $500 million to investors if it didn’t sell but put in place SQN’s recommendations. The firm wants Yelp to partner with ANGI HomeServices and/or GrubHub to boost growth and increase the revenue it earns per visitor to its site. Expenses need to be cut at the company, reported Bloomberg.

On the sale front, SQN said it could get $50 a share in a sale with a laundry list of potential suitors. Some of those include strategic buyers and those that want access to Yelp’s local reviews database. The firm pointed to TripAdvisor, Amazon and Facebook as potential suitors. Mehta told Bloomberg that private equity firms could also step up as acquirers.

The call comes at a time when Yelp shareholders have been struggling. The stock is 23 percent lower during the past year and a warning about growth in November prompted a slew of downgrades by Wall Street. SQN wants to nominate three directors from SQN to the Yelp board. Only three of the eight directors are up for election in 2019, noted Bloomberg. “While we are not activists, and prefer to work constructively with Yelp on the reconstitution of its board, we are prepared to take our recommendations directly to stockholders to seek their support,” Mehta said.