Match Group Inc. will pay $441 million for a hard-fought legal battle with Tinder's founders over the valuation of the mobile dating app, ending a nearly monthlong trial before it goes to the jury.
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Match and its controlling investor, IAC InterActiveCorp, have a settlement on Wednesday morning, a day before the parties were to give closing statements in the trial over a lawsuit brought by Tinder founder Sean Rad and other early executives and employees against Match and its controlling investor, IAC InterActiveCorp.
In 2017, the companies that created Tinder at IAC's Hatch Labs incubator, and the other plaintiffs in the case say they were cheated by the companies, which valued Tinder at $3 billion in 2017, instead of the $13.2 billion they claim it was actually worth.
Match dodged a major bullet with the settlement, as the company continued to face significant risk as the trial progressed, and could have been hit with $2 billion in damages if the jury found in favor of Rad's group, Tom Claps, a litigation analyst with Susquehanna International Group, wrote in a note to investors.
The deal took this long, according to Matthew Schettenhelm, who said Match had a 70% chance of winning. This is a substantial settlement but letting a jury decide a billion-dollar question is too much risk. The issue isn't overhanging and should let the company move on. Shares in Dallas-based Match fell by $2.51, or 1.9%, to $133.69 on Wednesday in New York. IAC fell $5.27, or 3.9 percent, to $128.38.
The trial featured testimony from witnesses, including Rad, IAC Chairman Barry Diller and former Match Group Inc. chairman and chief executive Greg Blatt.
The trial included testimony from both sides that painted diametrically opposed views of what occurred during the valuation, and we believed plaintiffs were successful in raising doubt whether Match and IAC properly handed over the valuation process, Claps said.
Rad and other early employees and executives sued IAC and Match in 2018, alleging the companies provided false information about the app's financial prospects to the banks that were hired to estimate its market value in order to produce a valuation well below the $13 billion they claim it was worth.
The lawsuit said that they were given options that allowed them to more than 20% of the company under a 2014 agreement that required Match to hire investment banks to independently value Tinder on four specific dates between May 2017 and May 2021.
They alleged that Match and its controlling investor, IAC, engineered a lowball valuation of the app by feeding information to the banks that underplayed its future growth prospects while excluding Rad from the process - then they merged Tinder into its parent company and launched a new premium service, Tinder Gold, the next day.
The valuation dispute has been settled, and we are very pleased that it has been settled, Orin Snyder and Josh Dubin, attorneys for the plaintiffs, said in a statement. It was a long and hard battle, and our clients are grateful that they had the opportunity to have their voices heard and achieve this outcome. After considering information from both sides, IAC and Match contended that the banks independently assessed Tinder's value. The companies said Rad fully participated in the process and that the plaintiffs sold their options for more than $700 million, which included $400 million for Rad, and are bitter that they missed out on Tinder's explosive growth.
The case is Rad v. IAC InterActiveCorp, 654038 2018, Supreme Court of the State of New York City None Charlie Penner, the Investor Reshaping Exxon From the Inside