Yelp Now, Facebook Next?

March 5th, 2012 at 3:00 pm

Well, it seems that tech stocks are still quite in high demand at the stock market. With many tech companies either planning or considering a move to go public, this may just further add fuel to an ever increasing fire. One of the recent beneficiaries of this growing popularity of tech stocks is the local review site Yelp.

Yelp has recently gone public and conducted its Initial Public Offering or IPO on the second day of March and pegged its initial stock price at $15 per share. Not everyone has expected what happened next. Yelp stocks seemed to garner quite a surprising demand on the market that led to its stock price to jump to $26 per share during its first day of trading. Yelp stock eventually cooled down a bit and settled at around$24.58 at the day’s end.

It was quite an interesting ride for Yelp during its first day of trading. It does show that tech stocks are still quite in demand, despite some of them showing quite disappointing numbers on its business revenues. Yelp earns revenues by selling ad placements on its site for local businesses. While revenues have increased to $83.3 million last year, it still took a $16.7 million in total losses, primarily due to previous losses piling up along with an increase in operating costs and expenses. The Yelp management has acknowledges that the tech company required renewed cash infusion in order to reach a level of profitability in the near future. Hence their recent IPO which provided the company around $107 million of fresh funds in exchange for selling around 7.15 million shares.

Yelp’s recent IPO success comes in the heels of another long awaited IPO that probably would even gain more interested investors without doing much of a sweat- Facebook. Although the social network giant has long planned to go public, it hasn’t yet given a definite date of its eventual IPO. But if it ultimately does, it would certainly become one of those much sought-after tech stocks in the near future, if the Yelp IPO success is to be considered.

The long awaited Facebook IPO may be one of those eagerly awaited events that may be coming up this year. Its moves are certainly going along that path, even if the Facebook executives themselves have been pretty mum about the idea and have provided no comment as of now. It may rank among those of Google’s IPO of the past in terms of demand and popularity. It may even be bigger. Its success may even herald another tech bubble forming in the market, leading other tech companies to follow suit in going public. We’ll just have to wait and see how all these will eventually come out.


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