“Hi! I’m dating stock called MTCH looking for a committed relationship with investors. I’ve got a ton of baggage from prior acquisitions and my latest passion is taking me in a new direction which I don’t have a handle on yet. I earn pretty good money but am in a kind of dead end job. I’ve got over a $1B in debt and almost no cash. I'm presenting myself as single but my old partner will still own me."
Online romance is a good business to start, just ask the founders of Meetic or Plenty of Fish. But it may not be nearly as good to be an equity holder of a “rollup” of dating sites which is what Match Group (Nasdaq: MTCH) is all about. There are a few other reasons to be leery of this profile:
- Unless you are a chronic dater once you’ve used a site like Match.com or similar you cease to be a customer. Of course relationships don’t last forever and you might be back but by then you may try another site or a different method entirely. That’s a pretty big flaw in the business.
- Tinder is a huge success for Match but a good news/bad news story because it is cannibalizing their traditional paid membership business and is more susceptible to competition in major cities with dense markets.
- Membership-only internet sites like Angie’s List (ANGI) and Care.com (CRCM) have done poorly. Other online romance sites like Jiayuan (DATE) and Spark Networks (LOV) have also failed to generate meaningful stockholder returns. (Don’t even mention the infamous FriendFinder!)
- Barry Diller is taking cash out here (if the IPO markets permit) and will still own 84% and 98% of the voting power. Match will also be encumbered with $1.2B of debt and little cash from the deal.
Our view on the stock is fairly consistent with other informed views we have seen and demand appears to lukewarm as we approach the scheduled pricing tonight (Wednesday, November 18.) Below is a valuation slide put together by BTIG research which has done a good job looking at this offering.