Yelp Defies Lockup Logic As Shares Soar

Equities Editors Desk  |

Much was made about Facebook's (FB) recent lockup expirations having a negative effect on the company's stock price--highlighted by founding investor Peter Thiel divesting over 70 percent of his shares. But the impact of lockup expirations are nothing new to the market--just look at the history of some of the most recent popular companies to IPO like LinkedIn (LNKD), Groupon (GRPN), Zynga (ZNGA), and Angie's List (ANGI) as examples. Yet, somehow Yelp (YELP) not only managed to avoid a steep drop, but actually saw shares jump well over 20 percent as its lockup period ended. Shares hit as high as $22.89 so far today.

So why the huge pop? Apparently, overzealous bears were caught in a classic short squeeze. With 52.7 million shares becoming unrestricted after the lockup period, many short sellers were expecting Yelp's stock to fall. The company, which owns the popular consumer review and social network platform, debuted on the Nasdaq in March at $15. In fact, the previous two trading days saw the company's stock close lower as traders prepared for the drop. When the stock opened lower, but then began to reverse direction, shorts were then pressured into buying shares to cover their positions, which in turned, helped to push prices higher.

According to Reuters, about 97 percent of shares available for borrowing for short positions were borrowed.

Unlike many of its peers, Yelp's share price has held up fairly well since the IPO. In addition, the company is also showing strong revenue growth but has yet to turn a profit. For the second quarter, revenue grew 67 percent to $32.7 million with

In the second quarter, Yelp’s revenue rose 67 percent to $32.7 million, and the company reported a net loss of $1.98 million, or 3 cents per share. Analysts were expecting revenue of $30.5 million with a net loss of 5 cents per share, according to Bloomberg.



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Companies

Symbol Name Price Change % Volume
YELP Yelp Inc. 33.05 -0.33 -0.99 214,322 Trade
FB Facebook Inc. 201.77 0.72 0.36 7,395,727 Trade
CBL.P.D CBL & Associates Properties Inc. Dep Shares Repstg 1/10th Preferred Series D 5.50 -0.09 -1.61 203,907 Trade
LNKD LinkedIn Corporation Class A n/a n/a n/a 0 Trade
ZNGA Zynga Inc. 6.13 -0.09 -1.37 5,712,778 Trade
GRPN Groupon Inc. 2.95 0.00 0.00 1,851,312 Trade
ANGI ANGI Homeservices Inc. 8.01 0.11 1.39 1,167,469 Trade

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