MTCH Stock Alert: Activist Starboard Value bets heavily on Match Group

Shares of the dating site company Match group (NASDAQ:MTCH) rose 7% overnight after an activist investor Starboard value announced that it holds a 6.5% stake.

Starboard wants Match to sell itself and go private if it is unable to quickly innovate and increase its margins.

Match owns several dating sites, the most well-known of which is Tinder. Match also owns OKCupid, Our Time, Hinge and the original Match.com.

Match opened this morning at about $34.22 per share. That represents a market cap of about $8.4 billion with estimated revenue of $3.4 billion in 2024. Shares are down 12% in 2024 and down 34% over the past year.

Not enough fish

One of Match’s sites is called Plenty of Fish. The problem is that there aren’t enough fish (or people) willing to trust their social lives to dating services.

Starboard’s proposal called for CEO Bernard Kim to reduce Tinder’s payment declines and cut costs to increase operating margins by 40%. The company wants to allocate more free cash flow to share buybacks.

Match was spun off from its former parent company. IAC Interactive (NASDAQ:IAC), in mid-2020. At that time, Match was selling for about $100 per share.

The deal was a “takeover” in which IAC controlled Match and dictated the terms. A Delaware Chancery Court recently rejected IAC CEO Barry Diller’s attempt to facilitate such transactions, upholding a legal framework that requires increased control on behalf of minority shareholders.

The FTC found before the spin-off that 25-50% of Match members were using the site for fraud. One victim, who was CBS was reportedly robbed of $2.5 million before he drowned.

CEO Bernard Kim reportedly responded to complaints by saying that “things happen in life.” Podcast host Jay Shetty was recently named the site’s “relationship counselor” in hopes of improving the user experience.

MTCH shares: What’s next?

MTCH’s share price could rise in the short term, but the Starboard letter shows that the company has long-term problems.

At the time of publication, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com Publishing guidelines.

At the time of publication, the editor in charge did not hold any positions (either directly or indirectly) in the securities mentioned in this article.