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Next-day blues: Yelp shares fall

March 05, 2012|By Walter Hamilton
  • As the euphoria surrounding the company's IPO dissipated, Yelp shares fell 15% on their second day of trading.
As the euphoria surrounding the company's IPO dissipated, Yelp shares… (Spencer Platt / Associated…)

The euphoria surrounding a red-hot initial public offering often doesn’t last long. Investors in Yelp Inc. may be discovering that.

Shares of the Internet-review site declined nearly 15% on Monday, an about-face from their sizzling 64% surge on the company’s first day of trading Friday. Yelp slid $3.59 to $20.99.

It’s common for IPO shares to cool down in the aftermath of a blistering IPO, and is not necessarily a bad sign for the long-term prospects of a company or a stock.

Still, it’s a reminder that investors who buy in on an IPO’s first day can get hit hard, at least in the short-term. An investor who purchased Yelp at its $26 peak Friday already has lost more than 19%.

Those lucky enough to snag the $15 IPO price still have a comfortable gain.

It can take awhile for investors to reclaim their first-day peaks. The performance of several recent social-media IPOs illustrate that.

Online game maker Zynga Inc. has easily outdistanced its opening-day peak in December. But LinkedIn Corp. remains 30% below the heights it scaled in May, while Pandora Media Inc. is down 44% from its debut in June.

RELATED:

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Yelp stock jumps in first day of trading

Yelp sets price target for initial public offering

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