MANHATTAN: Tinder founders, executives and early employees sued IAC/InterActiveCorp and Match Group Inc. for at least $2 billion, claiming the owners of the dating app are trying to cheat them out of stock options that gave them more than one-fifth of Tinder’s value.
The 10 people suing include co-founder and former Chief Executive Officer Sean Rad and co-founder and former Chief Marketing Officer Justin Mateen. They claim IAC and Match used “false, misleading and incomplete financial information and projections” to create an artificially low valuation of Tinder and avoid paying the group money they’re due under options agreements.
“We were always concerned about IAC’s reputation for ignoring their contractual commitments and acting like the rules don’t apply to them,” Rad said in a statement. “But we never imagined the lengths they would go to cheat all the people who built Tinder.”
Match Group shares were down 3.6% to $48.21 at 1:30 pm on Tuesday. IAC fell 0.5% to $190.22. The lawsuit was first reported by CNBC.
Match Group and the plaintiffs went through a “rigorous contractually defined valuation process involving two independent global investment banks,” Match and IAC said in a statement. Rad and Mateen “may not like the fact that Tinder has experienced enormous success following their respective departures, but sour grapes alone do not a lawsuit make.”
The group claimed credit in the complaint for taking Tinder “from an unknown startup to a cultural icon in less than five years.” IAC and Match “merged Tinder out of corporate existence” hours after providing a low-ball valuation for the app company and terminating agreements under which the plaintiffs held 20% of Tinder’s value, according to the complaint.
The suit comes less than a week after Match said revenue was expanding faster than analysts expected, largely because of Tinder, which CEO Mandy Ginsberg called the company’s “growth engine.” In 2018, the company expects Tinder to have revenue of as much as $800 million, according to the lawsuit.
“This success is the product of the hard work of the Tinder plaintiffs,” according to the complaint.
Rad and the other founders said that they and other current and former employees were granted stock options in 2014, setting four dates on which they could be exercised: May 2017, November 2018, May 2020 and May 2021. The companies undervalued Tinder at $3 billion in May 2017, then eliminated the remaining three dates as part of the merger, they claimed.
“They suppressed and lied about the existence of true financial forecasts that contradicted defendants’ false projections,” the suing former employees said. “They bullied and threatened to fire Tinder executives — including plaintiff James Kim, Tinder’s current vice president of finance — to stop them from telling the truth.”
Swiping through potential matches on the Tinder app has become a ubiquitous part of Millennial dating culture with its subscriber numbers skyrocketing and year-over-year revenue growing at 136%.
The suit does not include or mention Whitney Wolfe, another Tinder co-founder who left in 2014 and sued the company. She alleged Rad and Mateen wrote her co-founder status out of the company’s history and sent her a “barrage of horrendously sexist, racist and otherwise inappropriate comments, emails and text messages.” She settled the suit later that year; Mateen resigned, Rad lost his CEO title, and she kept equity in the company.
The case is Rad v. IAC/InterActiveCorp, Supreme Court of the State of New York (Manhattan).