Investor warns of proxy fight with Yelp

One of Yelp Inc.’s largest investors thinks the userreview website’s shares could almost double and is prepared to launch a proxy fight if the company doesn’t follow its recommendations to improve performance.

SQN Investors, a technology-focused investment firm that says it owns more than 4 percent of Yelp, said in a presentation that the company could create significant value for investors either by fixing its problems or by selling itself.

Yelp’s shares could soar to $65 apiece and it could return $500 million to investors if it stayed independent and implemented SQN’S suggestions, the firm said. Yelp’s shares closed at $35.75 on Wednesday, giving the company a market value of almost $3 billion.

San Francisco-based Yelp should partner with companies like ANGI Homeservices Inc. or Grubhub Inc. to drive growth and improve the revenue it receives per visitor, SQN said. It also wants Yelp to rein in its expenses, among other measures.

“We continue to believe Yelp has great potential to deliver significant value for its investors,” Amish Mehta, founder of SQN Investors, said in the statement. “After years of Yelp underperformance, we have lost patience and believe the board needs fresh perspectives and stockholder representation.”

SQN argues Yelp could fetch as much as $50 a share in a sale, Mehta said. There would be a large group of potential bidders, including strategic buyers and those seeking to leverage Yelp’s database of local reviews, he said. Potential suitors could range from rivals such as Tripadvisor to Amazon.com or Facebook, Mehta said.

Private equity firms may also be interested in the company, he said.

Yelp said in a statement it was focused on taking actions to deliver on its strategy and achieve sustained, long-term growth to create shareholder value.

Shares in Yelp had fallen about 23 percent the past year through Tuesday. Analysts hit the stock with downgrades in November after it warned that growth was likely to continue to slow.

Yelp has a staggered board, which means only three of its eight directors will stand for re-election this year. SQN is prepared to nominate three directors of its own if the company doesn’t enact its proposed changes.