The company has had several interested suitors after which it hired Goldman Sachs to help find a buyer, Bloomberg said on Thursday.
The company's shares fell as much as 15 percent to a two-year low of $36.10 in afternoon trading. Yelp had a market capitalisation of about $3.2 billion (roughly Rs. 20,293 crores) as of Wednesday's close.
Yelp may pursue a sale again if Chief Executive Officer Jeremy Stoppelman changes his mind, Bloomberg said. The report did not name the suitors or say why Stoppelman had taken the decision to halt the sale process.
The company could not immediately be reached for comment.
Yelp was working with investment bankers to explore a sale that could fetch more than $3.5 billion (roughly Rs. 22,196 crores), the Wall Street Journal reported in May.
The company's subscriber growth has been slowing in an increasingly competitive US market and it has been trying to expand in other markets and diversify into restaurant bookings, event management and payments.
Yelp was most recently in the news for commissioning a study into Google's anti-competitive search practices. The study suggested that Google sometimes alters results to play up its own content despite people's preferences.
The team of researchers hired for the study consisted of academics from Harvard and Columbia, and included Tim Wu - best known for coining the now oft-used term 'net neutrality'. The team showed 2,690 Web users with two versions of Google. One showed search results for local businesses as users usually see them, with links to the businesses along with ratings as posted to a Google site. The other version showed links to businesses along with ratings from rival sites like Yelp.
The study found subjects were 45 percent more likely to click on links if Yelp and other competitors were included - a sign, researchers say, that users prefer more diverse search results.
Written with agency inputs
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