Activist investor TCS Capital Management on Tuesday urged Yelp Inc YELP-N to either explore a sale or a merger with online-services company Angi Inc ANGI-Q, sending shares of the service-recommendation site 10 per cent 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 per cent.
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 dialog 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 per cent 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 per cent in the last reported quarter and Yelp raising its full-year net revenue outlook.