INTERNATIONAL - The next online dating company to go public probably won’t be cheap, but might need to reach some middle-ground with investors on its valuation, according to an analyst and a portfolio manager.
An initial public offering in Bumble could value the millennial-focused courtship app at as low as $1.1 billion, below the $1.5 billion figure it was reportedly seeking in January, according to calculations by Synovus Trust senior portfolio manager Dan Morgan.
Billionaire Andrey Andreev, the majority holder of Bumble’s parent company, is talking to banks including JPMorgan Chase & Co. about a possible Nasdaq listing, he told Bloomberg last month.
In the absence of any public filings to provide insight into the company’s financials, Morgan used the average price/sales multiples of three peer companies: Spark Networks SE, Meet Group Inc. and Match Group Inc. Match operates a portfolio of online dating companies such as OkCupid, PlentyOfFish, Match.com and Tinder -- perhaps the most similar to Bumble. Both are targeted towards millennials in urban areas.
Morgan applied the average multiple to an estimated 2019 revenue of $283 million to get a $1.1 billion IPO valuation, though said it could increase on Bumble’s plan to launch advertising next year.
"At this point, you’re just looking at people paying for subscription fees," he said in a phone interview. "Whereas when you start monetizing 41 million users, the numbers can get a lot more interesting."
Bloomberg Intelligence analyst Sean Handrahan expects a public valuation of $1.1 to $1.5 billion-plus, excluding any discount for IPO investors. He cited a discounted free cash flow model and price-multiple analysis, assuming 2019 revenue of $283 million from a developed market base of 62 million potential users. He said two other factors that could boost the valuation above the $1.5 billion level are expansion into international markets and profitability in the company’s networking and friends vertical.
A spokesperson for Bumble declined to comment and a spokesperson for Andreev, the majority shareholder of Bumble owner Rimberg International Corp., didn’t immediately respond to request for comment.
Despite the promising catalysts in 2019, Bumble and Tinder both face a possible threat from Facebook Inc. The social media giant has already begun testing its in-app dating features with its Colombian users and plans to launch in the US at an unspecified date. Investors will be watching to see how successful it is at stealing away market share.