What happened

Shares of crowd-sourced review platform Yelp (YELP 2.91%) jumped on Tuesday after an activist investor publicly expressed its frustration with the company and demanded action. As of 10:30 a.m. ET, Yelp stock was up about 9%. Shares of Angi (ANGI 0.81%) were also up about 8%, and it relates to what's happening with Yelp.

So what

TCS Capital owns 4% of Yelp and has been a shareholder for about five years. But it's been a bad investment. If you bought shares of Yelp five years ago today, you'd be down about 20% on your investment even after today's jump in price.

TCS Capital lays out a list of things that it believes are wrong with the stock. But it believes shares are undervalued and that management needs to do something about it. The activist investor suggests that Yelp stock could have more than 100% upside if the company sold to a private-equity firm.

TCS Capital also suggests that Yelp could merge with Angi. Whereas Yelp allows consumers to leave reviews for local businesses and generates revenue via advertising, Angi provides a review platform for finding service professionals. Therefore, the business models are similar.

Suggesting shares of Yelp and Angi are undervalued is exciting for investors. And it's why both stocks were up today.

Now what

Activist investors can suggest anything they'd like, but Yelp is not obligated to do anything. Therefore, until management responds, I'd suggest that investors continue to view Yelp as an independent company and to build an investment thesis under this assumption.

TCS Capital does applaud many of Yelp's virtues, including its revenue growth and its strong balance sheet. And indeed, Yelp does seem to be well capitalized and quarterly revenue has reached a new record high for six straight quarters. However, I personally wonder how top-of-mind a brand like Yelp is right now, considering almost half of its revenue is spent on sales and marketing.

If Yelp could gain operating leverage in sales and marketing, it could unlock greater profitability and the stock would likely respond positively, in my opinion. That's something I would watch. If the company can reduce spending and still grow revenue, I believe that would be a bullish sign.