First, Angie’s List (NYSE:ANGI) announced that it was “testing” price cuts of as much as 75% in key markets to attract new members to its site providing reviews of “high cost of failure” services to homeowners such as plumbing. Then, it apparently had second thoughts after its share price plunged.

According to the Wall Street Journal, which trumpeted the price cut in an interview with CEO William Oesterle, “the tests appear to have abruptly ended.” The Indianapolis-based company didn’t provide the newspaper with an explanation for its change of heart and a company spokeswoman didn’t respond to an email seeking comment for this story. Shares of Angie’s List plunged more than 17% Thursday after the original Journal report. They rebounded some Friday morning though they haven’t recaptured their earlier gains. The stock has had an extremely wide 52-week range, trading between a low of $9 and a high of $28.32. The stock is currently trading near $16.

The company, whose commercials are ubiquitous on cable television, appears to be in turmoil and has recently lost two high-level executives, Chief Technology Officer Manu Thapar and Chief Financial Officer Robert Millard. Its business model, which relies on consumer fees and advertising revenue, is under attack from rivals who provide similar services for free such as Home Depot ‘s (NYSE:HD) RedBeacon and IAC/InterActiveCorp's (Nasdaq:IACI) HomeAdvisor. RedBeacon, which currently operates in 11 states, plans to expand nationwide over the next two years. HomeAdvisor boasts 2 million verified reviews and a network of 85,000 “pre-screened pros.”

The competition doesn’t end there. Though Yelp ​(Nasdaq:YELP) is best known for its reviews of restaurants, consumers can also get information on professionals such as plumbers and electricians. It attracts about 108 million monthly unique visitors. Angie’s List has about 2 million paid members. Other competitors include Google (Nasdaq:GOOG), which acquired Zagat’s restaurant reviews, and Frommer’s travel guides.

Investors had high hopes for Angie’s List, at least at first. After its IPO in late 2011, the company traded at 11 times sales, which at the time was higher than Google, which was valued at about 5.4 times sales, according to Bloomberg News. Wall Street took a shine to the company after it announced earlier this year that it expected to turn cash flow positive in 2013 as it slashed its marketing costs. The company has promised Wall Street that it will have its first profitable quarter this year, which Oesterle had dubbed “a year of transition.”

Many investors have doubts about the company’s plans. A whopping 37.8% of the company’s shares are held by short-sellers, who profit when stock prices fall. The company has also been burning through cash. As of the end of June it had about $45.8 million in cash and cash equivalents, according to a filing with the Securities & Exchange Commission. At the time of its IPO, Angie’s List had about $93 million in cash on its books. The company’s long-term debt has remained steady at about $15 million.

In a highly critical report issued earlier this year, Citron Research Executive Editor Andrew Left noted that Angie’s List had an accumulated deficit of $219 million while corporate insiders have sold $135 million worth of stock since its IPO. The research shop also took issue with the company’s ban on anonymous comments.

“One of Angie’s most advertised selling points is that its reviews are from `real customers,' Left wrote. “Yet the single most common complaint about Angie’s List from `real people’ is that nearly all of its online reviews are `A’s.' ”

In an email, Left said he is short Angie’s List, “This stock should be at $5 at best,” he writes. “It is just ridiculous. Of course I am short, how can you not be?”

The Bottom Line

Given the uncertainties around the stock caused by confusion over its pricing and the turnover in its management, investors should avoid Angie’s List for now. The risks with owning the stock are too great given the potential rewards.

Follow Jonathan Berr on Twitter@jdberr and on Berr’s World

Disclosure - At the time of writing, the author did not own shares of any company mentioned in this article.

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