I appreciate that none of you reading this article have heard of Tinder, but for the uninitiated (and I include myself), Tinder is a web-based dating ‘app’ that provides a means by which people can view each other’s pictures and, by swiping left or right on their mobile phones, indicate that they are “interested” in meeting that person or not. On just one day, the Tinder App will be swiped left or right 1.6 billion times. That’s a lot of dating.
The App is now the subject of a law suit in New York, with the previous owners suing for damages. In essence, they allege that the current owners (the Match Group) manipulated the value of the company at purchase to undervalue it; as a result, they are seeking $2 billion in damages from the current owner and its parent company.
The case was brought in the New York State Court last Tuesday (14.08.18) and the suit is really very interesting in a number of (purely legal) respects, providing some insight into the disputes that can arise between ‘techies and creators’ and the ‘money side’ of an operation; investors provide seed capital, and investors are interested in returns.
At the heart of the claim is a financial analysis undertaken in 2017 which set a value on the App - which was exactly the same as its valuation two years previously. The claim alleges that Match, acting in concert with others, deliberately falsified the data upon which the banks relied to complete their analysis; specifically that expenses and costs were overestimated whilst potential revenue was underestimated. The combined effect was to reduce the App’s valuation.
The Respondents regard the claim as being without merit and have said they will vigorously defend the claim. In effect, the Respondents state that no one could have predicted the success of the Tinder App. They have also rubbed legal salt into the wound with a rather pithy riposte: “sour grapes alone do not a lawsuit make”.
The allegation remains though, that there was a 2015 valuation of $3 billion, and a 2017 valuation also of $3 billion, this despite alleged significant growth in revenue and subscriber numbers during that period. The Claimants further allege dishonesty on the part of the Respondents and state that they “essentially stole billions of dollars by not paying us what they contractually owe us”.
What is even more interesting from a legal point of view is that the Claimants offer no valuation of the Tinder App in their claim. All they say is that the App is worth “multiples” of the $3 billion figure. A few simple calculations based on the damages claim suggest that the Claimant values Tinder in the region of $12 billion; the current owner, Match Group, has a stock market value of $13.5 billion.
Match Group has made its position very clear indeed: "The facts are simple: Match Group and the plaintiffs went through a rigorous, contractually-defined valuation process involving two independent global investment banks, and Mr. Rad and his merry band of plaintiffs did not like the outcome, ….. [the Claimant] has a rich history of outlandish public statements, and this lawsuit contains just another series of them. We look forward to defending our position in court."
That’s one interesting ‘date’ that everyone will swipe right for.