Yelp Inc.

Attention Yelp Inc. Investors: Yelp Requires Payment to Suppress Negative Reviews According to a Recently Filed Class Action

Robbins Arroyo LLP announces that an investor of Yelp Inc. (NYSE: YELP) has filed a federal securities fraud class action complaint in the U.S. District Court for the Northern District of California. The complaint alleges that the company and certain of its officers and directors violated the Securities Exchange Act of 1934 between October 29, 2013 and April 3, 2014 (the “Class Period”). Yelp describes itself as an online networking platform that connects people with great local businesses.

Yelp Is Accused of Making False and Misleading Statements About the Company’s Policies Regarding Customer Reviews Affecting Its Forecasted Financial Growth Prospects

The complaint alleges that Yelp made materially false and misleading statements and caused the Company’s stock price to trade at artificially inflated prices because: (i) reviews appearing on the Company’s website were not authentic “firsthand” reviews; (ii) algorithms purportedly designed to screen unreliable reviews did not comprehensively do so, and the Company allowed these unreliable reviews to remain on the website while it tried to sell services designed to suppress negative reviews; and (iii) in light of these facts, the representations concerning the Company’s current and future financial condition and prospects, and the extent to which they were reliant upon undisclosed business practices, did not have a reasonable basis. Notwithstanding, Company insiders sold 1,160,910 shares of Yelp stock at prices as high as $98.99 per share for insider trading proceeds of more than $81 million between November 11, 2013 and March 10, 2014.

The truth of Yelp’s practices begins to emerge on January 7, 2014, when the Virginia Court of Appeals issued a ruling requiring Yelp to disclose the identities of anonymous Yelp reviewers who had written negative reviews. Between the court ruling and the news articles, the Company’s stock declined, falling from a close of $82.21 per share on January 10, 2014, to $75.84 per share on January 13, 2014. However, after the Company’s February 5, 2014 financial results and increased financial guidance, its stock price jumped nearly 20% from $75.23 to $89.46 per share.

On March 31, 2014, the Los Angeles Times published an article entitled “Yelp’s Practices Sound to Some Like Extortion” and discussed the Company’s practice of offering customers a service to suppress negative reviews for a fee. Several news articles followed the ruling, highlighting the problems with Yelp’s review practices. Then, on April 2, 2014, it was reported that the Federal Trade Commission had received more than 2,000 complaints about Yelp, many contending that Yelp “posts fraudulent reviews that defame their reputation … after they decline to pay Yelp for sponsorship.” Between April 1, 2014 and April 4, 2014, Yelp’s stock price dropped from a close of $80.18 to $65.76 per share.

Yelp Investors Are Encouraged to Contact Shareholder Rights Law Firm Robbins Arroyo LLP

If you invested in Yelp and would like to discuss your shareholder rights, please contact attorney Darnell R. Donahue at (800) 350-6003, or you can complete the form below and we will contact you directly.

 

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