Yelp Faces Suit By Shareholders Questioning Quality of Online Reviews

August 8, 2014

Yelp Inc. and its executives have been accused in a lawsuit of selling more than $81 million in stock while deceiving shareholders about the quality of consumer reviews on its website.

The proposed class action, which was filed in U.S. District Court in San Francisco on Wednesday, said Yelp’s share price had reached artificially inflated prices of over $98 earlier this year because the company had misrepresented its true condition.

“Reviews, including anonymous reviews, appearing on the company’s website were not all authentic ‘firsthand’ reviews,” the lawsuit said, “but instead included fraudulent reviews by reviewers who did not have first-hand experience with the business.”

Yelp said in a statement that the allegations “are without merit” and said it “will vigorously contest them.”

As media reports about problematic consumer reviews surfaced earlier this year, Yelp stock sunk to just under $66 per share in April, the lawsuit said. Before the stock drop, Chief Executive Jeremy Stoppelman sold over 132,000 shares for proceeds of over $2.5 million, according to the lawsuit.

The company reported its first quarterly profit as a public company last week. Its shares closed at $67.78 on Wednesday.

The lawsuit in U.S. District Court, Northern District of California is Joseph Curry, individually and on behalf of all other similarly situated vs. Yelp Inc et al, 14-03547.

(Reporting by Dan Levine; Editing by Leslie Adler)

Latest Comments

  • August 8, 2014 at 7:30 pm
    Off topic says:
    You might want to use a few more letters to spell out your name, insexpert. I'm pretty sure it's not what it looks like at first glance.
  • August 8, 2014 at 4:23 pm
    Gone Fishin' says:
    Caldude: Yes, but have you read this article beffore you rated it? How is what Yelp content includes different than Amazon cookbook reviews that say "I LOVE IT!!! THIS IS THE ... read more
  • August 8, 2014 at 3:59 pm
    AttorneyCA says:
    Yelp is a complete scam that moves negative reviews to small businesses front page and the positive reviews to a back page people rarely see. They do this in order to make th... read more
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