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Sunday, November 21, 2023

Tinder’s owner lowballed app’s value even as revenue surged, founder claims

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Barry Diller’s dating-app giant Match Group lowballed the value of Tinder as it negotiated with the hookup app’s founders over their exit packages in 2017, bilking them out of billions of dollars in the process, co-founder Sean Rad alleged in court.

Specifically, Rad testified on Friday that Match –which also owns OKCupid, Hinge and PlentyOfFish — had assigned Tinder the same $3 billion value it had given the internally two years earlier, despite revenues that had since quadrupled.

Rad made the dramatic allegation in support of a lawsuit he and other early employees of Tinder filed against Match and its parent IAC, the media conglomerate controlled by Diller. They say Diller’s companies intentionally cooked the books to value Tinder at just $3 billion in 2017 when it should have been worth at least $13.2 billion.

They’re suing the companies for $2 billion, which they claim is their rightful cut of the proceeds. Match Group has denied the accusations. 

On Thursday, Rad described a 2015 valuation process in which some Tinder employees were allowed to sell stock options. In order to determine how much the employees would be paid for the options, Rad said Match’s then-executive chairman Greg Blatt, who later became the CEO of both Match and Tinder, had to sign off on a number for Tinder’s valuation. 

“It was Greg Blatt and the Match Group [who] set the valuation at $3 billion for Tinder in 2015,” said Rad, adding that he had “no question” that Blatt had personally approved the dollar amount. 

Tinder was then valued again at $3 billion in 2017 — a move that jurors may question since Rad has testified that Tinder revenue had surged 400 percent between the valuations, according to Susquehanna litigation analyst Thomas Claps. 

Tinder app
Tinder was valued at $3 billion in 2015 and 2017 — even though growth had skyrocketed between the two valuation dates, co-founder Sean Rad says.
Getty Images

“This piece of new trial evidence raises the obvious/logical question for the jury of how Tinder could have only been worth $3 billion two years later,” Claps said in an investor note shared with The Post.

An IAC spokesperson told The Post that Tinder did not deserve the $3 billion price tag in 2015 but that the company made payments based on at a higher valuation to retain talent because they thought Tinder’s employees had been misled about the company’s valuation.

“In 2015 certain Tinder employees had the ability to participate in a liquidity event in which IAC offered, and then did, buy Tinder options at a premium price,” the spokesperson added. “IAC took accounting charges because the price at which we purchased the Tinder options was well above the market value of Tinder, at the time. All accounting shows that Tinder was not valued at $3 billion in 2015.”

While Match’s team has yet to cross-examine Rad on the claim, Claps said that he expects the argument to play heavily in Rad’s team’s closing arguments, which are slated for the week after Thanksgiving. 

Barry Diller
Barry Diller denies his company cheated Sean Rad and other co-founders out of $2 billion.

Blatt himself took the stand on Friday afternoon, where he was grilled by Rad attorney Orin Snyder about past statements he’d made about Tinder’s prospects, including a May 2017 investor call where Blatt said Tinder was an “incredible business” and said new features would continue “driving our continued growth.” 

Prior to Blatt’s testimony, Friday morning’s session saw testimony in support of Rad from Jonathan Badeen, an early Tinder executive who is still with the company.

Badeen, who was initially a plaintiff in Rad’s suit but was forced to drop out because he had signed an arbitration agreement, testified that he felt pressure from Blatt to downplay Tinder’s prospects in 2017. Blatt did not respond to the allegation on Friday but is expected to do so early next week when his testimony continues. 

Match’s attorneys sought to question Badeen’s credibility by saying that he had signed a litigation funding agreement under which he stands to be paid an undisclosed amount of money if the jury rules in favor of Rad’s camp.

Greg Blatt
Former Match and Tinder CEO Greg Blatt took the stand on Friday afternoon.

Rad’s attorneys say that Badeen and two other witnesses with litigation funding deals — former Tinder executives James Kim and Rosette Pambakian — inked the agreements in order to help make up for stock options that Tinder took away when they initially joined the suit. They say that the money has nothing to do with their testimony. 

Judge Joel Cohen, the Manhattan Supreme Court judge hearing the case, has declined to throw out witnesses with litigation funding deals but has said the defense is allowed to raise the issue to jurors. 

On Friday, Rad’s team questioned whether one juror in the trial had violated rules against discussing or looking at media coverage of the trial outside of the courtroom, telling Judge Cohen that a juror “comes into court with the New York Post tucked under his arm each day.” 

Judge Cohen later reminded the jurors to not look at any media coverage of the trial.

Rad spokeswoman Brandy Bergman did not respond to a request for comment.  

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