Why it's happening: Recall in early May, Yelp stock popped more than 20% after The Wall Street Journal reported Yelp was working with Goldman Sachs on the sale after receiving interest of a potential takeover, and that it had been in contact with potential buyers. At the time, WSJ noted a deal wasn't "imminent ... and it's possible Yelp will decide against a sale."
Sure enough, Bloomberg today cites "people with knowledge of the matter" as saying Yelp indeed had "several interested suitors but isn't pursuing a transaction in the immediate future." The sources elaborated Yelp may pursue a sale going forward if Yelp co-founder and CEO Jeremy Stoppelman changes his mind.
It's hard to blame Stoppelman for holding off. Yelp has, after all, beat analysts' bottom-line expectations in each of its past three quarters. But investors rightly remain worried about Yelp's over-reliance on Google for traffic, high churn, and sluggish domestic growth as Yelp builds a foundation to properly monetize its comparatively young international sites. In any case, that's why I think Yelp could still be a good bet for investors with time on their side, and patience to watch as Yelp's long-term efforts bear fruit. But as today's drop demonstrates, I think it's unwise to bet on an acquisition -- which is never guaranteed -- as a central part of any investment thesis.
Steve Symington owns shares of Apple. The Motley Fool recommends Apple, Google (A shares), Google (C shares), and Yelp. The Motley Fool owns shares of Apple, Google (A shares), and Google (C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.