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Yelp Shares Plummet; Is the Company in Trouble?

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The company's stock took a beating on Wednesday

Spencer Platt/Getty Images

Yelp, America's favorite site for amateur restaurant reviews and the bane of many chefs' existence, suffered a brutal business day on Wednesday. Yelp stock closed at $25.06 per share, down 25 percent from the opening bell. The big selloff came a day after the San Francisco-based company announced meager second-quarter earnings and the resignation of chairman Max Levin.

Yelp's rough Wednesday continued a 16-month trend. Since peaking at $97.25 last March, the stock has fallen nearly 75 percent. Yelp hadn't dropped to $25 per share since March 2013.

Yelp Stock

Financial analyst Rob Enderele told CNN Money Yelp is facing a dire situation: "You've got this cloud of distrust. The end result is that people are using it less and less. That is a going-out-of-business trend." Among the issues that concern Wall Street investors are downgraded sales targets for the fourth straight quarter and a slowdown in traffic growth.

The bad news for Yelp comes at a time when it is embroiled in an ongoing fight with Silicon Valley giant Google, which tried to acquire the company for $500 million in 2009, and a $5 million lawsuit over unpaid tips from drivers for food-delivery service Eat24. Yelp acquired Eat24 in February and says it isn't to blame for the missing tips.

Despite the bad news, Yelp is worth between $3.1 and $3.5 billion, and it began looking at potential buyers in March. However, earlier this month co-founder and CEO Jeremy Stoppelman reportedly put any sales plans on hold. That announcement hasn't done much to inspire confidence in investors.

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