Yelp is preparing to fight an activist investor who is pulling for a board shake-up and a potential sale.
According to CNBC, sources say that the review site has hired Evercore to help defend it against hedge fund manager SQN, which owns 4 percent of Yelp shares.
Last month, SQN released a presentation citing the company’s “significant underperformance,” and called for “an immediate sale to a private equity firm could yield a $47 to $50 stock price.”
“We continue to believe Yelp has great potential to deliver significant value for its investors,” Amish Mehta, founder of SQN Investors, said in a statement last month. “After years of Yelp underperformance, we have lost patience and believe the board needs fresh perspectives and stockholder representation.”
Evercore is now reportedly exploring the market for the company, but has yet to start a sales process. With a current market valuation of over $3 billion, there are not many “credible buyers,” one of the sources said. SQN’s report suggests that Yelp is worth $4 billion or more.
The site has had a hard time over the last few years as it has faced tough competition from the likes of Google. Shares of Yelp have fallen by more than half over the past five years and are down 15 percent in the past 12 months. In fact, activist investor SQN revealed that Yelp has underperformed on the Russell 2000 Technology Index by 117 percent.
“As we made clear in our detailed presentation released in January, SQN believes there are multiple pathways to significant value creation at Yelp, including through the company remaining public and implementing our recommendations, or through a sale of the company to a large universe of private or strategic buyers,” according to a statement from SQN. “We are unclear on how anyone could credibly state that potential buyers don’t exist without having run a fulsome strategic process. As we’ve previously stated, we know of multiple buyers who would be interested, and we believe these potential acquirers would be eager to participate in such a process.”