We believe he inappropriately runs the Company as his private fiefdom – even though he beneficially owns only 5% of the shares outstanding (only slightly more than do we) and has no special voting rights. Stoppelman has remained CEO of the Company for nearly 20 years. Despite the stock's poor performance, Mr. We believe that Yelp's main obstacle to improved share price performance is Company CEO and co-founder, Jeremy Stoppelman. We believe that Yelp's tragic stock performance is attributable to several factors: 1) the complacency of its co-founder and longstanding CEO 2) the laxity of its puppet Board 3) the outrageously high stock-based compensation that has enriched senior management at the expense of unaffiliated stockholders and 4) a long history of poor execution that has left the Company in a perpetual penalty box. Well capitalized companies with consistently high revenue growth and profitability rarely, if ever, trade as low as 4.8x EBITDA and 8.5x cash earnings. Furthermore, Yelp stands to benefit greatly from increased integration of AI and machine learning, especially with regard to improving the quality and value of Yelp reviews and recommendations. Moreover, the Company generates significant free cash flow – even though it is not maximizing profitability – and has a pristine balance sheet with nearly $300 million of net cash. In fact, its strongest and largest business segment – home services – has reported 20-25% annual revenue growth rates over the last four quarters. This depressed valuation is even more remarkable given that Yelp has reported annual revenue growth rates in the high teens over the last eight quarters. Despite having one of the most recognized digital brands, 73 million users, and 265 million reviews, the Company trades at only 4.8x forward estimated EBITDA and 8.5x forward estimated cash earnings, with a 12% free cash flow yield. Over the last 10 years, Yelp's share price has been flat, underperforming the S&P 500 by a staggering 208%.Īmid this horrific underperformance, Yelp has become one of the most undervalued stocks that we have encountered in our 22 years as an investment firm. Over that time period, Yelp shares have declined 30% and underperformed the S&P 500 by 98%. We have owned shares of Yelp for most of the last five years. As a former board member and longtime investor in ANGI, I believe that a Yelp and ANGI combination would yield enormous revenue synergies and cost savings that could ultimately double the value of Yelp's shares. ("ANGI," formerly known as Angie's List) to form a powerhouse in the $500 billion home services market. Alternatively, we believe Yelp should explore a tax-free merger with Angi Inc. We believe that Yelp is shockingly undervalued and could be sold to either a strategic or private equity buyer for at least $70 per share – or more than a 120% premium to Yelp's current stock price based on reasonable valuation assumptions. The purpose of this public letter is to express our serious concern and disappointment with the abysmal performance of Yelp's stock price and to demand that the Board immediately explore strategic alternatives. ("Yelp" or the "Company"), making us one of the Company's five largest stockholders. TCS Capital Management, LLC and myself ("TCS," "we" or "us") beneficially own more than 4% of the outstanding shares of common stock of Yelp Inc. Attn: Diane Irvine, Chairperson of Board of Directors
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