March 29, 2024

DealBook: Yelp Surges After Lockup Expires

7:28 p.m. | Updated with closing price.

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, the stock soared after the so-called lockup period expired.

On Wednesday, shares rose 22.51 percent to close at $22.37, its largest one-day gain since the company went public in March.

Given the gains, it appears that 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 both Groupon and Facebook dropped sharply after their lockups ended. Facebook hit a record low this month when early investors started to sell some shares.

Peter Thiel, Facebook’s first outside investor, sold 20 million shares at roughly $20, or nearly half the original offering price of $38. The large sale by Mr. Thiel, who also sits on Facebook’s board, spooked some investors who interpreted it as a sign that insiders were losing faith in the social network.

Many analysts expected the same fate for Yelp. Since mid-August, shares of the online reviews site have been hammered, dragged down in part by concerns that early investors would dump stock once the lockup period ended.

Adding to the pressure, Yelp faces the same challenges of other young Internet companies. While the company is one of the most popular review sites on the Web, it is also struggling to convert more local businesses into paying users. Consumers can get access Yelp’s reviews free, and vendors have the option to spend money on advertisements or other services.

But only a fraction of businesses with profiles on Yelp — about 4 percent — pay the company anything. Last quarter, Yelp’s revenue rose 67 percent to $32.7 million, although the company recorded a net loss of 3 cents a share.

“This is still a concern,” said Aaron Kessler, a Raymond James analyst. “How many businesses will actually advertise on Yelp versus just get free traffic from the site?”

A Yelp spokeswoman declined to comment on Tuesday.

The stock action on Wednesday seems to indicate that Yelp’s biggest investors are holding on to their shares — at least for now. The company’s five largest shareholders, Bessemer Ventures, Elevation Partners, Benchmark Capital, Max Levchin and Jeremy Stoppelman, the company’s chief executive, collectively own more than 80 percent of the company’s stock.

Unlike some recent Internet I.P.O.’s, Yelp’s biggest holders have been conservative about their stock sales. No insiders sold in the I.P.O., with the exception of the company’s charitable foundation, which sold 50,000 shares, according to filings.

In contrast, the game maker Zynga allowed some insiders to sell at the I.P.O. in December and then again at a second offering in April. Shares of the online game company are down 70 percent since its debut.

Article source: http://dealbook.nytimes.com/2012/08/29/yelp-surges-after-lockup-expires/?partner=rss&emc=rss

DealBook: Joshua Kushner’s Thrive Capital Raises $40 Million

Joshua Kushner, the 26-year-old son of real estate mogul Charles Kushner, has raised $40 million for his venture capital firm, Thrive Capital, according to a regulatory filing on Monday.

The fund, the firm’s second, includes several prominent investors including Princeton University, Hall Capital Partners, Wellcome Trust and the venture capitalist Peter Thiel, best known for his early bet on Facebook, according to a person close to the matter. Through co-investment deals with its limited partners, the firm has the option to invest as much as $100 million, said this person, who spoke on condition of anonymity.

The new fund will focus primarily on technology start-ups in New York with a consumer or social bent, but it may also make investments in Latin America.

“New York has emerged as an ecosystem for technology and innovation; I believe that innovation today is less reliant on geography and more on how the Web works,” said Mr. Kushner, who is also a co-founder of Vostu, the largest online gaming company in Brazil. “The new capital efficiency of Web infrastructure enables companies to be built and scale from anywhere; New York just happens to be filled with some of the most creative and thoughtful people in the world.”

Since opening Thrive in 2009, Mr. Kushner has invested in more than two dozen companies, including the social connectivity tool Hot Potato, which was bought by Facebook, and the group messaging service GroupMe, sold to Skype on Sunday. Last year, Thrive also led a $1.25 million investment in Art.sy, an online art portal. The fund-raising round included Google’s then-chief executive, Eric E. Schmidt; the venture capitalist Jim Breyer; and Jack Dorsey, the founder of Twitter, who also serves as an official adviser to Thrive Capital.

Article source: http://feeds.nytimes.com/click.phdo?i=2950e0e592a8baed4addb9bf0a1f1534

Bits: Dropping Out to Start a Tech Company

Peter ThielBloomberg NewsPeter Thiel

Parents, do you hope that your children have the chance to become like Peter Thiel, the PayPal co-founder, Facebook investor and hedge fund manager? If so, Mr. Thiel suggests that you encourage them to drop out of school. In fact, he will help by paying them to do it.

On Wednesday, the Thiel Foundation, funded by Mr. Thiel, announced the first group of Thiel Fellows, 24 people under 20 who have agreed to drop out of school in exchange for a $100,000 grant and mentorship to start a tech company.

More than 400 people applied. The winners include Laura Deming, 17, who is developing anti-aging therapies; Faheem Zaman, 18, who is building mobile payment systems for developing countries; and John Burnham, 18, who is working on extracting minerals from asteroids and comets.

The fellowship addresses two of the country’s most pressing problems, Mr. Thiel says: a bubble in higher education and a dearth of Americans developing breakthrough technologies.

Much of the technological talent these days is going into Web sites and apps. Mr. Thiel says he has no problem with those — Facebook has made him a billionaire. But “there’s a more urgent need for innovation” in other areas, he said, like biomedical technology, nanotechnology, transportation and energy.

Mr. Thiel, a contrarian investor and libertarian known for his controversial views, knows that suggesting education is not always worth it strikes at the core of many Americans’ beliefs. But that is exactly why is he doing it.

“We’re not saying that everybody should drop out of college,” he said. The fellows agree to stop getting a formal education for two years but can always go back to school. The problem, he said, is that “in our society the default assumption is that everybody has to go to college.”

“I believe you have a bubble whenever you have something that’s overvalued and intensely believed,” Mr. Thiel said. “In education, you have this clear price escalation without incredible improvement in the product. At the same time you have this incredible intensity of belief that this is what people have to do. In that way it seems very similar in some ways to the housing bubble and the tech bubble.”

In Silicon Valley, following in the footsteps of Bill Gates, Mark Zuckerberg and Evan Williams by dropping out of school might make sense. But many employers would never look at a resume that does not list a college degree, and of course some professions require advanced degrees. As the Times reporter Catherine Rampell has written, the job market is bad for college graduates right now but even worse for non-graduates.

But Mr. Thiel said the recession had opened parents’ and students’ eyes to the problems with the belief in higher education.

“I think a program like this would have been unthinkable in 2007, but I think you increasingly have people who are graduating from college, not being able to get good jobs, moving back home with their parents,” he said. “I think there’s a surprising openness to the idea that something’s gone badly wrong and needs to be fixed.”

Mr. Burnham, the fellow working on mineral extraction from outer space, agreed with Mr. Thiel, whom he first became aware of via the movie “The Social Network.” He said that college did not fit every student.

“What I really liked about this program is it’s giving a lot of people who maybe wouldn’t get into Harvard an opportunity to participate in something just as selective and just as valuable and just as educational,” Mr. Burnham said. “It’s giving them that opportunity even though their personalities and characters don’t quite fit the academic mold.”

His father, Stephen Burnham, said the decision for his son to skip college, at least for now, was uncontroversial.
“There’s a lot of other stuff that you get in college and I would say that would be useful for John,” he said. “But I would say in four years there’s a big opportunity cost there if you could be out starting your career doing something that could change the world.”

Article source: http://feeds.nytimes.com/click.phdo?i=3dc4fec4ab695684f1a2f5e337da0474

Economix: Once Again: Is College Worth It?

The dismal job prospects for new college graduates have revived debates about whether college is “worth it.” The PayPal founder Peter Thiel is among the major skeptics, but there are plenty of others. Check out the comments on yesterday’s article about employment rates for recent grads to see what I mean.

College provides plenty of intellectual and psychic benefits alongside the potential economic ones, granted. Let’s just focus on the economic ones. Is college worth it, economically? My colleagues David Leonhardt and Floyd Norris had a blogging debate about this question, which I encourage you to go back and read. For now I’d just like to highlight a few factors to consider.

It’s true that the job market for new college graduates stinks right now. But you know what? The job market for non-graduates is worse.

People with more skills have a broader range of jobs they can do, and having a postsecondary degree sometimes serves as litmus test for employers who can be picky about hiring.

As a result, unemployment rates decline as workers become more educated:

DESCRIPTIONSource: Bureau of Labor Analysis, via Haver Analytics

College graduates also earn more money than their less-educated peers. That gulf in earnings has only widened in the last few decades: the inflation-adjusted pay of college graduates has risen, and the inflation-adjusted pay of every other group has fallen.

(Aside: People with higher degrees have even lower unemployment rates, and earn even more money.)

Additionally, in a survey of recent graduates from the Heldrich Center at Rutgers — the same survey that produced figures on graduates’ poor job prospects — respondents seemed to wholeheartedly agree that college is indeed “worth it.”

Nearly three-quarters of recent graduates said they believed their degree was as valuable now as they thought it would be when they first enrolled in college. Additionally, three-quarters said their college education did extremely well or pretty well in preparing them to be successful in their first full-time job.

That’s not to say they don’t have some regrets. About that same proportion said they would do something different if they could start college over again. Here are some of the things they’d like a redo on:

DESCRIPTION“Unfulfilled Expectations: Recent College Graduates Struggle in a Troubled Economy,” Heldrich Center for Workforce Development, Rutgers University.

Lots of people would have changed their major, or done an internship, or started looking for work sooner while enrolled. Did you notice what category of regrets got the lowest share of responses?

Wishing they hadn’t gone to college.

Article source: http://feeds.nytimes.com/click.phdo?i=147f0091b2300ead0557a91baaa5c037