Yelp IPO Opens at $15 a Share

Yelp IPO Opens at $15 a Share

Yelp (NYSE: YELP) is holding its IPO today, becoming the latest in a string of social media stocks to go public.

The local business reviews website opened at $15 a share, above the $12-$14 range that was expected of its initial public offering. The company raised $107 million, giving it a market capitalization of $899 million entering its first day of public trading.

Yelp draws an average of 66 million monthly visitors to its website. Visitors can either read reviews of businesses throughout the U.S., Canada, Western Europe and Australia, or post reviews themselves. The company says it plans to eventually expand its footprint in both the U.S. and abroad.

Like many of its social-media stock predecessors though, Yelp has never been profitable. The San Francisco-based company booked $83.3 million in revenue last year, a 74% improvement from 2010. But the company suffered a net loss of $16.7 million, nearly double the $9.6 million it lost the year before.

Groupon (Nasdaq: GRPN), LinkedIn (NYSE: LNKD) and Zynga (Nasdaq: ZNGA) were other high-profile social-media companies that went public last year despite never being profitable. Of those three, only Zynga is still trading above its first-day closing price – and it went public just over two months ago.

Yelp can take some solace in the success of Angie’s List (Nasdaq: ANGI), however. A website that helps people find and review local contractors and other service providers, Angie’s List is the social media stock with a business model that closely resembles Yelp’s. Its stock is up 23% from its IPO since going public in November.

So far, so good for Yelp’s stock too. As of 11:20 a.m., it was already up 63% from its IPO price, trading at $24.55 a share.

But don’t get too excited if Yelp pops to incredible heights on its first day. As we’ve seen with most of its recent predecessors, such heights are usually unsustainable for unprofitable social media stocks.