Tinder Founders Launch $2 Billion Lawsuit Against Match Group, IAC
A group of 10 current and former Tinder employees have launched a lawsuit against InterActiveCorp and Match Group (NASDAQ: MTCH), the owners of Tinder, in New York State Supreme Court in Manhattan. The employees are suing for $2 billion, alleging that the defendants purposely undervalued Tinder before its tie-up with Match to devalue early employee options. The plaintiffs include Tinder cofounders Sean Rad, Justin Mateen, and Jonathan Badeen.
Tinder was founded as part of an IAC-owned incubator called Hatch Labs. IAC later merged Tinder with Match, valuing the former at $3 billion. Tinder, based in Los Angeles, operates on a day-to-day basis independently from IAC and Match.
The lawsuit alleges that IAC and Match designated Greg Blatt, Match’s chairman and CEO, as interim CEO of Tinder in December 2016 in order to “control the valuation of Tinder” prior to the merger. It says that Blatt and other IAC and Match executives created “false financial projections, inflating Tinder’s expenses and inventing an alternate universe in which Tinder was stagnating toward freefall” in order to reduce the valuation of the company.
The moves were made before the first date when the founders could have exercised their stock options. The valuation of Tinder is important because the valuation process directly affected how much the founders’ options were worth. The complaint states, “The reason for these management changes was clear: to allow defendants to control the valuation of Tinder and deprive Tinder option-holders of their right to participate in the company’s future success.”
The group of early Tinder employees are represented by the firm Gibson Dunn. Orin Snyder, a lawyer for the plaintiffs, said: “The evidence is overwhelming that when it came time to pay the Tinder employees what they rightfully earned, the defendants lied, bullied, and violated their contractual duties, stealing billions of dollars. A jury will now hold the defendants responsible for their multibillion-dollar theft.”
IAC called the allegations in the complaint “meritless”. In a joint statement, the companies said, “With respect to the matters alleged in the complaint, the facts are simple: Match Group and the plaintiffs went through a rigorous, contractually – defined valuation process involving two independent global investment banks, and Mr. Rad and his merry band of plaintiffs did not like the outcome.” The statement went on to say that the companies were looking forward to defending their position in court.