As Match Group Inc. (Nasdaq: MTCH) prepares to go public, investors are wondering, "Should I buy Match.com stock?"
Here's your comprehensive guide to the Match.com IPO and whether you should buy MTCH stock...
What Investors Need to Know About the Match.com IPO
The Match.com IPO price range is between $12 and $14 a share. The company will announce a final price on the evening of Wednesday, Nov. 18. Match Group will raise $433 million by selling 33.3 million shares.
Following the deal, Match Group will command a $3.2 billion valuation. That's higher than Chinese dating app Momo Inc.'s (Nasdaq ADR: MOMO) $2.7 billion pre-IPO valuation.
The deal is a spin-off of media conglomerate IAC/InterActiveCorp (Nasdaq: IACI). IAC owns a number of websites, including Investopedia and The Daily Beast. After the Match IPO, IAC will own all outstanding shares of Class B stock. That means IAC will have majority voting power on matters like electing board members and changing dividend policy.
Match Group is the largest division of IAC and owns 45 dating and educational services. These include Match.com, Tinder, OkCupid, The Princeton Review, and Tutor.com. Over the last six years, Match has acquired 25 different brands for a total cost of $1.3 billion.
As the largest online dating conglomerate in the United States, the company benefits from a burgeoning industry. According to its U.S. Securities and Exchange Commission filing, Match targets "adults in North America, Western Europe and other select countries around the world who are not in a committed relationship and who have access to the Internet." As of Sept. 30, Match's dating sites attract 59 million monthly active users and 4.7 million paid members.
That large customer base has helped the company continually boost revenue...
Match posted $888.2 million in revenue last year, up 10.6% from 2013. The company's profit grew 64% from $90.3 million in 2012 to $148 million in 2014. It's one of the few Internet-based firms to be profitable before going public.
Now that we know everything about the upcoming deal, investors keep asking, "Should I buy Match.com stock after the IPO?"
Here's how you should approach MTCH stock when it debuts next week...
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Should I Buy Match.com Stock After the IPO?
There are three important reasons why you shouldn't buy Match.com stock after the IPO.
First, other online dating companies have recently struggled to find success on Wall Street. Momo stock is down 17.1% in the last three months. San Francisco-based dating platform Zoosk scrapped its IPO plans back in May, citing "unfavorable market conditions."
The second reason to avoid MTCH stock is the company's vulnerability to cyberattacks. Dating sites have become a popular target among hackers following infidelity website Ashley Madison's data breach in July. The attack revealed the names, email addresses, and credit card details of the site's users.
"We are frequently under attack by perpetrators of random or targeted malicious technology-related events," the IPO filing said.
And the final reason is IPO investing is generally bad news for retail investors.
You see, IPOs only benefit institutional investors willing to buy large quantities of a stock before its debut. These "insiders" send the stock soaring on its first day of trading, which leads retail investors to think they can capture most of these profits if they jump in right away.
But when retail investors jump in on the first day, the stock has usually already soared. So retail investors are buying in at an inflated first-day price. They're also missing out on the gains the Wall Street insiders already snagged.
When the price settles back down following the IPO frenzy, many of the retail investors who got in late are looking at a loss. This disadvantage can cause massive losses for traders like us who aren't hedge fund managers or investment bankers.
We will be providing extensive coverage of the Match.com IPO. Follow us on Twitter for all of the biggest updates.
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