Yelp confounds short sellers as shares jump 22.5 percent

Updated: August 29, 2012 - 9:44 PM

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Yelp is shrugging off the social media slump.

When early investors first get a chance to sell their shares in a newly public company, a stock typically falls as owners pare back their holdings. In the case of Yelp Inc., the stock soared after the so-called lockup period expired.

Shares rose 22.5 percent on Wednesday to close at $22.37, marking the largest one-day gain since the company went public in March at $15 a share.

Given the gains, it appears that many of Yelp's early investors decided to stick with their holdings.

"It's refreshing to see insiders with discipline," said Michael Pachter, a Wedbush Securities analyst.

The stock got an added boost from short sellers, investors who were betting that the stock would fall. When the stock rose, they had to cover their positions and buy shares.

Yelp's post-lockup performance stands out from its peers: Shares of Groupon and Facebook dropped sharply after their lockups ended. Facebook hit a record low earlier this month when early investors started to unload shares.

NEW YORK TIMES

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