Match Group gets heat from another activist investor

Starboard Value became the third activist investor this year to take a stake in Match Group Inc., the owner of the dating app Tinder whose paying customer base has shrunk for six straight quarters.

Starboard has built a stake of more than 6.6% in Match, a letter reviewed by Bloomberg News shows. The investor plans to push for a sale of Match if the company fails to turn around its operations, according to the letter.

Match and other online dating companies have been struggling with slowing growth, intensifying competition and challenges in retaining paying users for over a year. Match in particular has been facing pressure from investors to deliver on a turnaround amid a number of top executive changes.

In addition to Starboard, whose investment in Match was previously reported by the Wall Street Journal, Elliott Investment Management LP and Anson Funds Management LP have also taken stakes.

Shares of Match rose 5.7% to $33.85 at 9:32 a.m. in New York on Tuesday. They’d fallen 12% this year through Monday’s close, giving the company a market value of $8.5 billion.

Starboard contends Match’s stock price, which has fallen about 70% over the past four years, has “significantly underperformed” despite “enviable market positions.”

A lack of innovation has caused a decline in paying customers at Tinder, Match’s largest app and the world’s most popular dating platform, while Hinge’s “innovative user interface” contributed to its growth and global expansion, Starboard said. With improvements at Tinder, Match could increase its expected growth rate of approximately 6% this year, according to the letter.

Match should consider cutting general and administrative costs and target an adjusted operating margin of more than 40%, Starboard said. The activist is also urging Match to buy back shares using at least 75% of its free cash flow.

‘Relentlessly Focused’

Match said in an emailed statement that it looks forward to continuing an open dialog with all of its investors, including Starboard.

“We are relentlessly focused on executing our key initiatives, which include: driving growth at Tinder, continuing Hinge’s impressive expansion, maintaining appropriate financial discipline, and returning capital to our shareholders,” the company said.

The activist is pushing the company to explore a sale if it fails to execute on demands for capital allocation and operational changes.

Match reached an agreement with Elliott in March when it appointed two new members to its board. The company also named a new Tinder chief executive officer, Faye Iosotaluno, after Elliott built a $1 billion position.

Tinder Declines

Tinder’s number of paying users has fallen below 10 million, based on its May earnings report. The company has blamed inflationary pressures on consumer spending.

Like its peer Bumble Inc., Match is contending with a generational shift in dating app preferences among younger users. The company has said it expects those declines to slow in the back half of the year as it releases more app updates.

– Crystal Tse and Natalie Lung for Bloomberg