Yelp , the online consumer review site, came out hot on its first day as a publicly traded company last week. The stock closed at $24.58 after its debut on Friday, up 63 percent from its $15 IPO price. Yelp traded strongly all day, hitting a high of $26 and never falling below its opening price of $22. The company estimates it raised $96 million after expenses. The IPO values the 8-year-old company at $900 million.
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Nick Einhorn, a research analyst at IPO investment advisory firm Renaissance Capital, says despite Yelp’s lack of profits thus far, the company has potential. “While it is still reasonably small from a revenue standpoint, the company is still in the relatively early stages of monetization — a large percentage of its revenue comes from its 20 oldest markets, so it should be able to continue to grow strongly as it drives monetization in its other 51 markets,” as well as in new ones to come.
The market has certainly not been as kind to all web IPOs. When Zynga debuted in December, the stock fell below its IPO price within minutes. Zynga was strongly profitable at the time of its IPO, while Yelp on the other hand has yet to post profits since it was founded in 2004, which just goes to show how fickle the market can be when it comes to tech.
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