As a local discovery platform Yelp – like Foursquare – has lost influence as Google continues to push its own products in Maps, the web, and anywhere else it can track users' locations.
Activist investor TCS Capital Management on Tuesday urged Yelp Inc to either explore a sale or a merger with online-services company Angi Inc , sending shares of the service-recommendation site 10% higher in premarket trading.
Yelp is “shockingly undervalued” and could be sold for more than twice its share price, said TCS Capital, one of the company’s largest investors with a stake of over 4%.
Yelp’s market valuation stood at about $2.1 billion, about $500 million more than Angi’s, as of last close.
TCS Capital founder Eric Semler said a merger with Angi, formerly known as Angie’s List, could create a major player in the $500 billion home services market.
Yelp and Angi compete in the online home services market, helping customers with repairs and renovations and other home care needs. Yelp also provides a platform for user reviews on local businesses from restaurants and dentists to mechanics.
“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,” Semler said.
Angi did not immediately respond to a Reuters’ request for comment, while a Yelp spokesperson said the company “maintains an active dialogue with our shareholders and values constructive feedback on our business and ways to create value.”
Shares of Yelp were up at $35.70 before the bell. They have risen 47% since going public in early 2012, while the benchmark S&P 500 index has more than tripled in the period.
The company is witnessing strong demand for its advertising products at a time when businesses are cutting back on marketing, with revenue rising 13% in the last reported quarter and Yelp raising its full-year net revenue outlook.
(Reporting by Samrhitha Arunasalam in Bengaluru; Editing by Rashmi Aich and Shinjini Ganguli)