Bumble Inc. is looking for love on the public markets as the operator of the popular dating app with the same name gets ready for its initial public offering.
The company is expected to make its debut on the Nasdaq Thursday, in an IPO that could rake in around $2.2 billion. Bumble BMBL, has a portfolio of products aimed at giving women more power in their various relationships, a basic tenet of the company’s namesake dating app that requires women make the first move when talking with potential suitors.
Bumble competes against online-dating powerhouse Match Group Inc. MTCH, +7.68%, which runs a number of dating brands including Tinder, which Wolfe Herd co-founded. Match Group is valued at more than $40 billion.
The company plans to sell 50 million shares through its offering, with the shares priced at $43 apiece. That positions Bumble to raise $2.2 billion. Bumble twice upsized its offering and increased its expected pricing, after originally saying that it planned to sell 34.5 million shares at $28 to $30 each.
Investors will be able to swipe up shares under the ticker BMBL. Here’s what else to know about the upcoming IPO.
On the corporate level, Bumble operates two brands. The company runs the Bumble portfolio, which houses the dating, friendship, and networking platforms under that name, and it also operates Badoo, a dating app popular in Europe and Latin America.
The Bumble brand has over 12 million monthly active users, and right now a focus is growing the non-dating areas of that business. “We plan to begin investing in marketing and product and to develop a monetization strategy for Bumble BFF, Bumble Bizz and other potential new categories,” the company said in its prospectus.
Bumble and Badoo are linked through their corporate past. When Blackstone took a majority stake in MagicLab, which operated both brands, back in 2019, Badoo’s founder Andrey Andreev sold his stake to Blackstone and stepped down as the chief executive of Magic Lab, explained MKM Partners analyst Rohit Kulkarni. Wolfe Herd kept her stake and became the company’s CEO.
Badoo has over 28 million monthly active users and “appeals primarily to a global emerging middle class,” Wolfe Herd said on the investor roadshow.
“While both of the apps are focused on empowering equitable and healthy relationships for everyone, we have a massive opportunity due to the different audiences that each app caters to,” she continued.
While Match operates a vast portfolio of dating brands, Bumble has a narrower portfolio but also a narrower focus on features that it says can help drive more equitable relationships. The namesake Bumble dating app requires that women make the first move when talking to matches, an element that carries over to the company’s business-networking app as well.
Bumble expands on that concept later in its prospectus, saying that women “are often the household’s primary decision maker” with an estimated $30 trillion in purchasing power worldwide, creating an opportunity for a company like Bumble “built specifically with women in mind.”
Speaking on Bumble’s virtual investor roadshow, Wolfe Herd argued that relationships often have “archaic gender dynamics that disempower women and… place pressure on men,” while the culture of online interactions in general can be harmful. “We believe that women were being underserved by dating platforms,” she said, something Bumble aimed to tackle.
The company cites third-party data saying it has a higher ratio of female to male users versus the market average and that its female users are more likely to pay for the service when compared to the market average.
Bumble generated revenue of $416.6 million for the first nine months of 2020, up from $362.6 million in the same period a year prior. The company posted a loss of $118.5 million during the first nine months of 2020, versus net income of $54.0 million in the comparable period a year earlier.
Though Bumble is free to use, the company generates revenue when customers purchase premium subscriptions, which give them access to features like the ability to boost their profiles’ reach or see who’s already liked them on the app. The company also generates some revenue from advertising and partnerships.
The company had 2.4 million average paying users as of the end of September 2020, up from 2.1 million at the end of September 2019.
MKM’s Kulkarni pointed to several positives that he saw in the company’s financials, including an earnings before interest, taxes, depreciation, and amortization (Ebitda) margin of 26%, and an expansion of the company’s gross margin. Negatives in his view include a growth slowdown during the pandemic.
There’s a messy history between Bumble and Tinder, where Wolfe Herd once worked.
Wolfe Herd founded Bumble after co-founding Tinder, which she later sued for sexual-harassment and other claims. The parties ultimately reached a settlement. Match, which owns Tinder, sued Bumble in 2018 alleging patent and trademark infringement. That litigation was also settled.
Match reportedly tried to acquire Bumble over the years, but it was unsuccessful in those efforts.
Match’s Tinder also announced three years back that it was planning to launch a women-talk-first option on its own platform, which would let women have the choice about whether or not they wanted to initiate all new conversations with matches.
It’s not just Match and its stable of dating brands posing a possible threat to Bumble’s business. Bumble notes in the risk factors of its prospectus that it markets and distributes its app through third-party publishers like Facebook Inc. FB, +0.90%, which has its own online dating service.
The company also cites risk stemming from Apple Inc.’s AAPL, -0.46% new operating system change, which requires that users opt in before their “identifier for advertisers” (IDFA) is shared with marketers. The IDFA lets marketers better target their advertisements, so depending on the rate at which users opt out of having their information shared, there could be an impact on the effectiveness of mobile advertisements on Bumble’s apps, which could affect what marketers are willing to pay.
The company also called out how Apple and Alphabet Inc.’s GOOGL, +0.53% GOOG, +0.57% Google take “a meaningful share (generally 30%) of the revenue we receive from transactions processed through in-app payment systems,” something that’s sparked outrage from many developers including Match and Epic Games, the creator of Fortnite.