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Grindr's $GRND Public Debut Went from the First Date to the Bedroom
Analyzing Grindr's $GRND debut on the New York Stock Exchange and their competitors
LGTBQ dating app, Grindr $GRND, opened in the New York Stock Exchange on Friday, November 18, and went straight from the first date to the bedroom in its public debut. According to analysts, Grindr's proposed market value was $2.1 billion before its public debut. However, with a closing stock price of $36.50, Grindr's first-day market value surpassed expectations and landed at $6.42 billion. So is $GRND a safe investment?
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Grindr is the biggest dating app for the LGBTQ community and boasts ~11 million monthly active users in over 190 countries. Established in 2009 in West Hollywood, California, Grindr touts an impressive 85% brand awareness rate, meaning 85 out of 100 people know what Grindr is.
Grindr users spend on average 61 minutes on the platform with 80% of users at or below the age of 35. Users are divided into two categories, free and paid. Of the approximately 11 million MAUs, 6.5% or 723,000 users are paying to use the platform. In 2021, this resulted in a non-GAAP total revenue of $147 million.
Source: Grindr Investor Relations | Link
Public Debut Performance
On the initial open, $GRND 0.00%↑slowly increased in value. Then, after 11am ET, the action exploded catapulting the share price from $28 to $56. Immediately, trading was halted due to (what was deemed) high and unusual activity.
After approximately a 15-minute delay, trading restarted with another jolt in activity that saw the share price climb above $70. The intraday high of $GRND 0.00%↑ reached over 400% of its opening price of $16.90. Then, the avalanche of reality quickly rolled down which prompted another halt in activity.
$GRND 0.00%↑plateaued towards the end of the trading session in the mid $30s, ending a turbulent day, but still claiming an impressive 213% increase over its opening bid.
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In the marketplace of dating apps, the elephant in the room is Match Group, or better known as Match.com MTCH 0.00%↑. The original dating app has grown by acquisition since its founding in 1995. Under the umbrella of Match Group features the most popular dating apps available in the largest 50 global markets and in over 40 languages. The most popular apps within Match Group include Tinder, Match, Hinge, Meetic, OkCupid, Pairs, PlentyOfFish, OurTime, Azar, and Hakuna Live.
Paid users in fiscal Q3 across the platform totaled 16.5 million and generated $810 million. As mentioned above, Grindr generated $147 million in the full fiscal year 2021.
Source: Match Group Q3 Earnings Report | Link
A new publicly-traded competitor in the dating marketplace was introduced in February 2021. Bumble BMBL 0.00%↑ is a "ladies first" dating app where women are the first to act and engage with potential suitors. Founded in 2014 in Austin, Texas by Whitney Wolfe Herd, Bumble operates in over 150 countries with approximately 12 million monthly active users, and 3.3 million paid active users. This generated $232 million in revenue in quarter three alone, securing Bumble as the second largest dating app.
Source: Bumble Q3 Earnings Report | Link
Bumble's introduction to the capital markets was the least risky proposition of the most common methods to go public. There are three primary methods for a company to be publicly traded. The first and least risky is the well-known and regulated IPO, or initial public offering. The second method which has gained popularity since the pandemic are SPACs, or special purpose acquisition company. The third and most risky method is a direct listing, whereby a company does the bare minimum to fulfill the requirements to become publicly traded. Because this process has fewer regulations, many institutional investors opt away from this type of investment due to the lack of transparency into the filing company.
Bumble's path to becoming public from an IPO entails fulfilling two major criteria. The first is the "investor tour." The investor tour parades around the executives of Bumble as they pitch their business to the biggest investors, namely institutional investors. This tour qualifies whether Bumble is a good investment or not. If institutional investors see a market opportunity for a company, then solidifying these big dollars translates to a higher level of trust for retail investors to invest their hard-earned money. Also, the more institutional investors decide to invest in Bumble, the more runway that company has to expand its business and return a profit to shareholders.
The second criterion to become publicly traded through an IPO is the mandates assigned by the governing body, the Securities Exchange Commission (SEC). These mandates are intended to minimize market manipulation of the company's stock price and provide several layers of transparency into the company. For example, while retail investors can buy and sell shares of a stock at any given time of the day, the biggest shareholders inside the Bumble company operation have particular periods during which they are forbidden to sell shares. Furthermore, once these "insiders" sell their shares, they must be disclosed on a form made available to the public.
Grindr voluntarily chose the SPAC method of becoming a publicly traded company. What does that mean and how does it work?
SPAC's Blind Check
A special purpose acquisition company is a company that has a "blank check" to take a private company public. Private companies select this method due to the expediency of becoming publicly traded. Whereas the IPO process may take more than 4-6 months, the SPAC process can happen quickly, like within 30 days. In the case of Grindr, the SPAC that had a blank check to take any private company public was Tiga Acquisition Corporation, and they selected Grindr as their target acquisition.
An IPO and a SPAC differ in two ways: 1) how funds are raised and 2) conflicting goals. As noted above, Bumble conducted an investor tour where they specifically raised money on their own behalf. In the case of Grindr, all the fundraising was led by Tiga Acquisition Corporation. When Tiga raises money, they are not required to disclose who are all the investors. (Update: This is one area of the SPAC process which is seeking more regulation and transparency by the SEC.) And this first difference directly affects the second difference.
Tiga Acquisition Corporation's primary goal is to take Grindr public, whereas Grindr's primary goal is to serve the LGBTQ community with their dating app. This conflicting goal often (like more than 90% of the time) inflates the market value of the SPAC-targeted company, Grindr. Evidence of how these conflicting goals play out is Tiga Acquisition Corp's CEO and mega investor, Raymond Zage, currently sits on the Board of Directors of Grindr. In the coming weeks, Zage will divest his interests and fiduciary responsibilities in Grindr, thereby affirming the conflicting goals that SPACs and SPAC-targeted companies have.
Is Grindr $GRND a safe investment? Like in the game of dating, it's best to court your partner and wait and wait and wait until you are ready to make the full commitment.
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