Yelp Inc., the popular Internet site for customer-written reviews of restaurants, hotels and other services, expects its shares to hit the market at a price of $12 to $14 each, giving the company a value of as much as $840 million.
The company said in a regulatory filing this week that it hopes to raise about $100 million in its initial public offering of more than 7.1 million shares. Its charitable foundation will sell 50,000 shares in the IPO, planned for early March.
It plans to sell nearly 12% of the nearly 60 million total shares outstanding. Some analysts scoffed at the potential $840-million valuation.
"It's impossible because they don't make any money," said Wedbush Securities analyst Michael Pachter. "The free service to consumers is great, but they're also offering free services to businesses."
The problem with Yelp's business model, he said, is that it overcharges companies that want ad impressions on the site; only 2.6% of the roughly 606,000 small businesses that maintain their Yelp profiles shell out the funds.
Most companies featured on the site instead have basic, free pages.
Pachter said the valuation also may have been inflated by earlier reports thatGoogle Inc.had tried to snatch up Yelp for $500 million. Still, he said, Yelp has enormous growth potential.
"I don't know what investors are going to do, but I personally think they have a ton of brand equity," he said. "I think they ultimately will have success."
Yelp shares are expected to be traded on the New York Stock Exchange under the ticker symbol YELP.
The San Francisco company began moving toward an initial public offering in November, even though its net loss last year increased to $16.7 million from $9.6 million the year before.
Yelp, founded in 2004, said it had 66 million unique visitors a month last year. The company probably will be the next major Internet IPO after Facebook Inc., which filed papers last month showing that the social networking site planned to raise $5 billion in a public stock sale.
"Always figured they'd be acquired by now," Yelp user Chris B. of Redondo Beach wrote on Yelp's Talk forum. "Nice to see the Craigslist of review sites all grown up."