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Yelp plans $100m IPO on value of '$1bn to $2bn'

Profits are soooo overrated

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Here comes yet another web-based company's initial public offering: crowdsourced reviews site Yelp has filed a Form S-1 with the US Securities and Exchange Commission, indicating that it plans to raise $1m in an IPO.

Not that the company thinks of itself as being worth that paltry amount, of course. Although the Form S-1 states neither the IPO's opening price nor the amount of shares to be offered – omissions that are standard operating procedure for this stage of an initial offering – The Wall Street Journal's ever-loquacious "people familiar with the matter" say the IPO could put Yelp's value at anywhere from $1bn to $2bn.

Yes, that's a rather wide range – and, yes, those are rather high numbers for most companies that have yet to make a profit. But, hey, it's the internet, so it's gotta be gold, right?

In their SEC filing, Yelp revealed that it netted $58.4m in revenue and had a net loss of $7.6m during the first nine months of this year. During all of 2010, net revenue was $47.7m with a net loss of $9.7m, and 2009 was $25.8m and $2.3m.

Other interesting tidbits noted in the filing are the fact that Yelp's sales and marketing expenses during the first nine months of 2011 were $1.1m, a steep leap from the $0.4m of the same period during 2010, and that "general and administrative" expenses rose six-fold, from $0.3m to $1.8m.

As those raised expenditures show, the Yelpers are feeling quite confident these days, a self-assurance evidenced by the plan to launch the IPO early next year with the help of Goldman Sachs, Citigroup, and Jeffries & Company.

Google was said to be sniffing around the site back in 2009, eventually putting out an offer for a rumored $500m or more, but was rejected. And, speaking of Mountain View, some observers are concerned about Yelp's future should Google ever choose to be less generous with its high search-result rankings of the user-reviews site.

Call us old-fashioned, conservative, or merely cautious, but an IPO that seeks to bring in an amount far exceeding the most recent 12 months of revenue seems a bit of an overreach – not to mention that it's mathematically impossible to calculate the IPO's annual net-income multiple, seeing as how Yelp has never made a profit.

But neither has Groupon, and at the end of their first day of trading earlier this month, the daily-deals dealer was worth $14.7, a tidy sum that has since swelled to $15.3bn.

What with the recent cluster of internet IPOs – LinkedIn, Pandora, Zillow, and Angie's List – causing investors' hearts to flutter in a decidedly uncertain economic climate, perhaps we merely don't understand the dynamics of high-risk equities.

But from where we sit, if it looks like a bubble, floats like a bubble, and is as fragile as a bubble, it may very well pop like a bubble. ®

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