Are you a former employee of Yelp Inc. (YELP) and own stock in the company? Robbins LLP is investigating breaches of fiduciary duty by the officers and board of directors of YELP.
Yelp, Inc. (YELP) Class Action Survives Motion to Dismiss
A class action lawsuit against Yelp, Inc. arising from the Company’s misstatements relating to its advertising revenue has survived a motion to dismiss, allowing the case to proceed to the next phase of litigation. Yelp derives substantially all of its revenue from the display of advertising products on its website and mobile app. In fact, advertising revenue accounted for 91% of the Company’s 2017 revenue. The complaint alleges that throughout 2016 and early 2017, Yelp misrepresented the success of its business and advertising model in order to increase its stock price. Specifically, Yelp repeatedly stated that it had a strong client base and high retention levels for advertisers when it was actually experiencing weak revenue and declining client retention in its local advertising business as a result of its move from a cost-per-impression system to a cost-per-click advertising system in 2015. Many of the advertisers added during the first quarter of 2016 were experiencing low user engagement under the new cost-per-click advertising system and therefore leaving Yelp’s advertising platform at the conclusion of their 12-month contracts. The truth was revealed when Yelp reported its first quarter 2017 financials on May 9, 2017, slashing its revenue guidance and EBITDA due to the churn of advertisers in the first quarter of 2017. While shareholders suffered as a result of a stock that followed this announcement, Yelp’s CEO had sold a significant amount of stock at the inflated price, coming out unscathed.