The activist hedge fund Starboard Value which was founded in 2002 by Jeffrey Smith and Mark Mitchell with Smith serving as CEO has acquired a substantial stake in Match Group Inc MTCH, the parent company of Tinder. The fund is urging Match Group to enhance its margins or consider a sale if the proposed changes do not yield the desired results.
What Happened: Starboard Value has taken a keen interest in Match Group. The hedge fund has accumulated a stake of over 6.5% in the online dating company and is advocating for a potential sale if the company’s performance does not improve, The Wall Street Journal reported on Monday, citing people familiar with the matter.
Match Group has been the focus of other activist investors, including Elliott Investment Management. The company’s shares have declined by approximately 12% this year, leading to a market capitalization of $8.5 billion.
Starboard is of the opinion that Match Group should concentrate on enhancing Tinder, which contributes more than half of the company’s total revenue. The fund suggests achieving this through product innovation and cost reductions. Starboard also sees potential in the Hinge business and Match Group’s other emerging apps.
Additionally, Starboard is advocating for more aggressive share buybacks by Match Group. If these changes are not implemented successfully, Starboard suggests that Match Group should consider going private.
A Match Group spokesperson stated that the company is “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.”
Starboard Value, Match Group, and Tinder did not immediately respond to Benzinga's request for comment.
Why It Matters: Match Group, which also owns dating platforms such as OkCupid and Plenty of Fish, has seen a significant shift in its market performance. The company’s market capitalization soared above $40 billion in 2021, but a decline in active users and inflated costs have since impacted its shares.
Starboard’s move to push for strategic changes in Match Group’s operations is indicative of the growing influence of activist investors in the tech sector. This trend is also evident in other companies, such as GoDaddy and Splunk, where Starboard has recently been active, according to the report.
Match Group reported its first quarter in May, the revenue came in at $787.12 million, missing the consensus of $793.87 million and representing a 2% decline from the same period last year.
Price Action: Match Group’s stock closed at $32.02 on Monday, marking a decrease of 0.81% for the day. In after-hours trading, the stock surged to $34.76, reflecting an increase of 8.56%. Year to date, Match Group has declined by 12.06%, according to data from Benzinga Pro.
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This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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