[Author was long YHOO at time of writing]
Yelp was down 25% yesterday. That's after Tuesday night's earnings call which made investors lose their lunch.
It's trading around $25 - that's down about 71% from its 52 week high.
The company cut its full year guidance on that call in part because it was closing its Brand business. That was a high-margin business that it cited about 2 months ago as a reason to feel good about its sales pipeline.
Say what?
That in itself would give you pause about what's going on inside the company. But there's a lot more to be worried about.
Its Chairman, Max Levchin, announced he was leaving the board to pursue other interests. Other interests? He's been doing a fine job of that for the last few years while serving on the boards of Yelp and Yahoo. Does he really need to drop off the Yelp board - as Chair no less - to pursue those other interests? If he was going to drop off any board, why wouldn't he take himself off the Yahoo board where he's not Chair if this is just about freeing up more time?
Levchin was part of the PayPal mafia along with Yelp founder and CEO Jeremy Stoppelman. Now Levchin is the 2nd member of that mafia to leave the Yelp board this year (Keith Rabois left earlier).
Why?
Recall that Levchin put some of his Yelp stock into a Roth IRA at the time of the Yelp IPO a few years ago, presumably because he wanted to save on taxes and didn't plan to sell his Yelp shares any time soon.
What happened?
The most troubling part of the report was that this was about the 4th missed earnings report in a row for Yelp.
The shift to programmatic continues to really hurt them.
Apple is also building up capabilities in its new version of iOS to provide small business information itself rather than rely on Yelp for that.
But the strangest thing to me is that after the last earning's report, the Yelp board decided to put itself up for sale at a then 52 week low of $37.
I wrote then: why now? If you're going to sell the company, why not do it at $86?
Clearly, they've let their business get away from them. My belief is that they decided to put themselves on the block before things got worse.
So they shopped themselves for several weeks and then reportedly Stoppelman decided to take the for sale sign down.
And then things got worse for Yelp on Tuesday. $37 a share sounds a lot better than $25.
Did Levchin disagree with Stoppelman's decision not to sell the company? It sure looks that way.
It's difficult to see how Yelp pulls itself out of this death spiral from here. The app keeps dropping in popularity and the other big potential buyers are all rolling their own in terms of building up these capabilities in house.
This post originally appeared yesterday in my newsletter yesterday.
