Tinder's parent company allegedly faked financial information to lower the dating app's valuation, according to a new lawsuit

Noam Galai/GettyTinder cofounder Sean Rad.
  • Tinder’s cofounders and executives are suing parent company IAC and Match Group over allegations that the parent company cooked the books to create a lower valuation for the popular dating app.
  • IAC and Match allegedly inflated Tinder’s expenses and downplayed new features in an effort to create a “false picture” of Tinder’s finances.
  • This led to a private valuation of $US3 billion in 2017, according to the lawsuit.
  • The end goal was to save the parent company billions of dollars when employees cashed-in their equity, by maintaining an inaccurately low valuation for the dating app, the lawsuit claims.
  • IAC and Match Group called allegations in the complaint “meritless.”

Tinder’s parent company allegedly faked the popular dating app’s financial figures in a scheme to avoid having to pay the app’s founders and long-time employees billions of dollars in equity, according to a bombshell lawsuit filed in New York on Tuesday.

The lawsuit, filed by a group of Tinder founders and executives, alleges that the app’s parent company IAC and its subsidary Match Group created a “disinformation campaign” and a “false picture” of Tinder’s financial figures and projections in order to reach a lower valuation for the company.

The key allegations in the complaint are that IAC inflated Tinder’s expenses, “inventing an alternative universe in which Tinder was stagnating toward freefall.” IAC also allegedly downplayed upcoming features which would impact Tinder’s performance figures.

As the result, Tinder was valued at $US3 billion in 2017 when its growth could have valued it even higher, according to the lawsuit.

The 2017 valuation was based in part on IAC and Match Group’s projection that Tinder would earn $US454 million in revenue for 2018, according to the complaint. But when Match Group announced its earnings on August 8, 2018, it said that Tinder is actually “on pace to exceed $US800 million in revenue in 2018.”

Like many companies in Silicon Valley, Tinder offered employees and founders stock options to give them “skin in the game,” according to the lawsuit, and Tinder plaintiffs owned more than 20% of the company’s value.

But as a subsidiary of IAC, Tinder’s financial figures were private and its valuation was set outside of the public eye.

This gave IAC the opportunity to “undermine Tinder’s valuation” to “save themselves billions dollars,” according to the complaint.

After the $US3 billion valuation was set, IAC cancelled three scheduled independent valuations set for 2018, 2020, and 2021, and reorganized Tinder’s executive structure so that its early employees could not exercise their stock options at a higher valuation, according to the complaint.

Founding CEO Sean Rad was replaced by IAC insider and Match.com CEO Greg Blatt.

In a joint comment, IAC and Match Group called the allegations in the complaint “meritless.”

Here’s IAC and Match Group’s full statement:

“The allegations in the complaint are meritless, and IAC and Match Group intend to vigorously defend against them.”

“Since Tinder’s inception, Match Group has paid out in excess of a billion dollars in equity compensation to Tinder’s founders and employees. With respect to the matters alleged in the complaint, 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. Mr. Rad (who was dismissed from the Company a year ago) and Mr. Mateen (who has not been with the Company in years) may not like the fact that Tinder has experienced enormous success following their respective departures, but sour grapes alone do not a lawsuit make. Mr. Rad 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.”

Here’s the full complaint:

TINDER FOUNDERS, CURRENTEXECUTIVES & EMPLOYEES SUE IAC/MATCH by Kif Leswing on Scribd

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