Match's stock surges after activist investor Starboard urges exploring a sale

By Tomi Kilgore

Match responds, by saying it will continue its open dialogue with all of its investors

Shares of Match Group Inc. got a big boost Tuesday, after activist investor Starboard Value LP urged the online-dating company to explore a sale if a turnaround proves challenging.

Starboard, the third-largest shareholder with 6.6% of Match's shares outstanding, said it believes Match is "deeply undervalued," as despite "premier assets" like Tinder and Hinge, the stock (MTCH) tumbled 70% since separating from IAC in July 2020 through Monday, while the S&P 500 has climbed 81%.

"It is the responsibility of the board and management to create shareholder value over time, and the stock market provides the ultimate scorecard," Starboard said.

The stock rallied 5.9% in morning trading, to around the highest closing price seen since April 9.

In a letter to Chief Executive Bernard Kim, Chief Financial Officer Gary Swider and to Match's board, Starboard Managing Member Jeffrey Smith wrote that if management is unable to meaningfully improve profitability and unlock the company's value, the company is a "unique and highly valuable asset that may be well-suited to operate as a private company."

This was Match's response to Starboard's letter:

"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," a Match spokesperson said in an emailed statement to MarketWatch. "We look forward to continuing our open dialogue with all of our investors, including Starboard."

In the letter, Starboard's Smith noted that Match's cumulative incremental margins are below its consolidated margins.

"This does not make sense," Smith wrote.

He said for almost every company, particularly internet-based companies, there should be significant operating leverage with incremental margins that are substantially higher than consolidated margins.

He said incremental margins for March should be above 50%, but are currently estimated to be 36.1% in 2024, down from 36.2% in 2023.

For Tinder, Starboard believes revenue growth has been hindered, as a "lack of innovation" after years of viral growth has led to user and payer declines.

Smith wrote that he believes Tinder's issues are addressable, and resolving them would drive improved results for Match.

"However, if performance fails to improve, we believe changes must be considered, which should include a thoughtful examination of whether Match's best path forward would be as a private company," Smith wrote.

The letter comes after The Wall Street Journal had reported late Monday that Starboard had built a stake in Match, and was pushing for a possible sale.

-Tomi Kilgore

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07-16-24 0933ET

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