While early investors in Yelp got their first chance to sell shares in the online reviews site on Wednesday, it appears they are holding on to their stakes for now.
When a so-called lockup period expires, a stock typically falls, as investors sell their shares. In the case of Yelp, the stock is surging. Shares were up nearly 25 percent to more than $22 on Wednesday.
“It's refreshing to see insiders with discipline,†said Michael Pachter, a Wedbush Securities analyst.
Yelp stands out from its peers in this regard. Shares of both Groupon and Facebook slid sharply after the expiration of their lockups. Peter Thiel, the first outside investor in Facebook, spooked investors, when he sold an additional 20 million shares at roughly $20, or nearly half the original offering price.
Many analysts were expecting the same fate for Yelp. Since mid-August, shares of the online reviews site have been hammered, dragged down in part by concerns that early inves tors would dump shares once the lockup period expired.
Despite the recent strength in its stock, Yelp still faces the same challenges of other young Internet companies. While Yelp is one of the most popular reviews sites on the Web, it is also struggling to convert more local businesses into paying users. Vendors have the option to spend money to serve advertisements and to manage their business pages. Consumers can access Yelp's reviews for free.
Revenue rose 67 percent in the last quarter to $32.7 million, but Yelp recorded a net loss of 3 cents per share.
Wednesday's stock action seems to indicate that Yelp's biggest investors are holding on - at least for now. The company's five largest shareholders, Bessemer Ventures, Elevation Partners, Benchmark Capital, Max Levchin, and Jeremy Stoppelman, the company's chief executive, collectively own more than 80 percent of the company's stock. A Yelp spokeswoman declined to comment on Tuesday.
“That's som ething we didn't see with Facebook,†said Mr. Pachter. “Facebook clearly didn't have any control over Peter Thiel.â€
