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Reviewing Yelp’s IPO

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  • Description

    Wedbush Securities Managing Director Michael Pachter on why it may not be the right time for Yelp to go public.

  • Duration 3:07
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Online reviews site Yelp is set to -- its IPO on Thursday Begin trading on Friday but the company isn't yet profitable.

Michael -- is the managing director of equity research -- wed -- securities he's joining us now.

For today's IPO report -- -- I was walking to a restaurant the other day wasn't even a major went and they had -- it said.

Okay we are -- Yelp restaurant and I started to notice there are more and more of those stickers on these doors this is getting huge is -- not that is now the right time Michael.

-- to go public.

It is pretty -- -- -- they have 66 million visitors unique visitors.

They rate 27 million businesses so just about every place you would go has been rated.

I don't think it's the right time to go public -- it unless you're an insider you're looking to cash out.

On that seems -- me we have a hot IPO markets of people Russian market.

We of the bush tax cuts expiring at the end of the year so the insiders wanna get 50% capital gains rates.

And they're locked up for six months after the IPO sort you're gonna have a rash of these things.

Before June but I'm not sure that unprofitable companies.

Really have any business going public and you have to prove they're profitable this reminds me of 1999.

I think we're -- a second Internet bubble.

-- I was I was just gonna say I was gonna say you know you look at a company that's losing money 65%.

Of its revenue is focused on marketing.

Of course it's it's sick it's free for the customers and business again a very narrow revenue stream it does seem a lot like one of those dot com companies who went bust.

I mean that what where you can get excited about it is that the others when he -- million businesses that are rated.

Only 600000.

Of those businesses of actually claimed -- Yelp pages.

And only about 24000.

Of those businesses are actually paying anything for advertising.

So I think the potential is great I mean think of Liz is starting to see it on the wall the restaurant now she's gonna look at -- next time if you start reading you know restaurants on Yelp tell your friends about it.

Then I think that restaurants more likely take ownership of the page and advertise to people like you but this is a slow process is probably a year to away from being really profitable -- -- hard to guess what it's really worth right now.

Not that you can't get two of the same type of company into the market place but Google's a pretty formidable competitor here and they just toxic gas which of course could be considered very similar.

How and I know they have some certain partnerships -- Google but it can Google -- the -- will that hurt the stock.

You know I think that all these guys kind of hope -- unify them so unit normally you get what they called parallel path.

Public listing while they're trying to sell privately.

You know Groupon did that Groupon turned down a private -- went public I think these guys have loved to be owned by Google I actually think -- makes much more sense as part of FaceBook.

Because although there -- 66 million users.

I'd really like -- of my friends think about a particular.

Business trip and you know it clearly Facebook's gonna compete so I think there the more formidable competitor.

Google really isn't great at local and they're really great local deals so I mean I think it's coming I think somebody's gonna compete but Facebook's a one bearing interest things up Michael Parker wed bush securities managing director thank you Michael.

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