Bumble has its best day ever as dating-app company in 'advanced' talks to go private

Shares of Bumble, the company behind the dating app of the same name, soared around 50% on Monday, marking their best day ever. The company is in talks to be sold at a valuation almost three quarters above its market capitalization even after the rally, the Wall Street Journal reports, citing people familiar with the matter. A deal could be announced as soon as this week, the sources said.

Bumble rose 49.6% on the Nasdaq on Monday to $3.80 per share. That marked their biggest daily gain since the company’s IPO on February 11, 2021. That day, the stock rose 63.5% from its IPO price, but finished 7.5% below its opening price.

Markets were reacting to the WSJ report on Monday: citing people familiar with the matter, the newspaper reported that Bumble is in advanced talks to go private in a deal valuing it at around $1 billion. That is 72% above the company’s market capitalization after Monday’s rally and three times its value at the close on Friday, October 9, the last trading day before news of the potential deal talks.

The prospective buyer is Ithaca Holdings, the WSJ’s sources said. Sequoia Capital partner Ravi Gupta and Meta veteran John Hegeman founded the holding company in March with a mission to “use frontier technology to build products that meaningfully improve people's lives.”

Ithaca plans to raise $1 billion and will seek to acquire at least one public or private company and introduce new technology into its operations, Bloomberg previously reported. Buying Bumble would be one of its first major moves, writes the Journal. Its sources said a deal could be reached as soon as this week, assuming the talks do not fall apart.

Bumble was founded in 2014 by Whitney Wolfe Herd, a former cofounder of Tinder, which belongs to Match Group. She sought to turn the traditional dating dynamic on its head by creating a platform where women initiate conversations.

The idea generated buzz. In 2021, Bumble went public on the Nasdaq, selling 50 million shares to investors at $43 apiece, above its initially announced price range. The company finished its first trading day with a market capitalization of about $7.7 billion. At 31 years old, Wolfe Herd became the youngest female founder to take a U.S. company public, according to CNBC. At its peak in February 2021, the dating-app company’s market capitalization exceeded $14 billion, the WSJ writes. Its market value has since plunged, with the company losing 95% of its value since its IPO.

Bumble’s financial performance “has been horrible,” Yahoo Finance Executive Editor Brian Sozzi wrote in a column. The app’s business model gives users basic features for free while charging for extras. In the second quarter, the company’s paying-user count fell 16.4% year over year, driving a 15.2% decline in revenue to $210.5 million. As part of Wolfe Herd’s efforts to stabilize the business, Bumble dropped its women-first messaging rule in August, allowing either person in a match to send the first message. The WSJ’s sources said that if Bumble goes private, the founder would at least remain involved with the company.

“It also doesn't help that millions are now forming relationships with personal AI agents rather than interacting with potential human companions,” Sozzi writes. These factors lead him to view the $1 billion valuation as excessive. Sozzi also points to a resurgence at Bumble’s competitor Match Group, which owns Tinder. Its new CEO, Spencer Rascoff, has been pushing the company forward by organizing in-person events where people can meet, with more planned.

“Social media made people's connection with one another worse,” Rascoff said in an interview with Yahoo Finance. What was conceived as a way to connect has become a platform for consuming content. He believes AI “has the potential to make this loneliness epidemic even worse as people start to form relationships or pseudo-relationships – what they perceive to be relationships – with AI.” “We think humans need humans now more than ever,” the Match Group CEO said.

The most common Wall Street rating on Bumble stock is “hold” (10 analysts). The stock also has one “buy” and one “underweight” call. The average target price is $3.49 per share, below the current market price.