Thursday, August 30, 2012

Yelp Inc (NYSE:YELP): Exodus Fears Unfounded

Fears of Yelp Inc(NYSE:YELP) shares tanking on the expiration of the lockup period proved to be baseless.  The fact that the scrip rose sharply, by 22% to be exact, shows that major shareholders are not using the chance to sell their shareholdings acquired before the 8-year-old company’s March IPO.

 The 180-day period in which early shareholders are not allowed to sell came to an end on Wednesday, and Yelp was expected to suffer the fate of Facebook Inc. and rival Angie’s List Inc.  These two scrips had been battered on lockup expiration as early investors had dumped their holdings.  Facebook’s first outsider investor, Peter Thiel had sold a whopping 20 million shares which constituted most of his holding and retained only a small chunk.  Instances of heavy selling like this one had raised doubts about investor confidence in these companies.

Can YELP Continue To Move Higher? Find Out Here

Insiders of other companies like Groupon Inc. and Zynga Inc. had also exited in hordes at the end of the lockup period, resulting in sharp falls in stock prices.  Many predicted that Yelp’s investors would behave on similar lines and sell in droves. 

This fear had shaved off 30% of the stock price and persisted till early Wednesday, when the scrip was in a downtrend.  However, it slowly became evident that there was going to be no investor exodus. This immediately changed the prevailing sentiment, bringing about a surge in the stock price.  Only 7.4 million shares were traded indicating that the large investors were going to stay put.

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