Match.com (Nasdaq: MTCH) Stock Price Will Move on These 3 Factors Following IPO

Match.com (Nasdaq: MTCH) will start trading on the Nasdaq on Thursday, Nov. 19. Match.com is one of the most anticipated IPOs of 2015.

nasdaq: mtchThe Match IPO price range is set between $12 and $14 per share. At the high point of that range, Match will bring in roughly $466 million through the IPO.

Money Morning Capital Wave Strategist Shah Gilani recently told readers about the potential of Match.com and described the company as "Social Disruptor."

MTCH stock is appealing to investors despite a flat 2015 IPO market. Match Group had a profit of $148.4 million on $888 million in revenue in 2014. Profits grew nearly 39% from 2012 to 2014.

Because of those growing profit and revenue figures, many investors are looking into Match (Nasdaq: MTCH) stock as a long-term investment. Here are the three biggest factors that will move the Match.com stock price following its debut...

Match.com (Nasdaq: MTCH) and a Billion-Dollar Industry

The first major factor affecting MTCH stock is the growing online dating industry.

According to VisualEconomics.com, online dating revenue increased from $1.3 billion in 2007 to $1.65 billion in 2012. The Financial Times reports that the industry is now worth roughly $2 billion.

Part of the boom in online dating is due to a change in attitudes. PewResearch found that 59% of Americans surveyed in 2013 thought that online dating was a good way to meet someone. That number was drastically lower in 2005, with only 44% of participants responding positively.

The online dating industry is also attractive to investors because it isn't cyclical or subject to volatility. There will always be a demand for Match.com and its holdings.

With 45 brands in its portfolio, Match.com has a strong presence in several niche dating markets. Match Group captures millennials with Tinder, the 50-plus market with OurTime, the African-American community with BlackPeopleMeet, and the international market with European dating site Meetic.

That network of sites makes Match.com one of the most dominant players in the booming industry.

Even with such a high demand, however, there is a huge issue Match needs to address within its user base...

Converting Match.com Users into Paying Subscribers

Match.com has 59 million active monthly users, but not all of them are paying for the service.

That's the second major factor that will impact the MTCH stock price.

With 4.7 million paid subscribers, only 7.9% of Match's user base is paying for its services. Match.com hasn't offered suggestions on how it's going to improve these numbers.

That could be because Match is focusing more on acquisitions than improving its flagship site...

In 2015, Match purchased 25 different dating and educational sites for a total cost of $1.3 billion. One of Match Group's purchases, PlentyOfFish, was actually a competitor. In 2010, Match.com actually sent a letter to PlentyOfFish stating that its stats were either misleading or untruthful.

At one point, Match tried to build a direct competitor to PlentyOfFish called DowntoEarth.com, but the site was a complete flop.

Instead of focusing on improving its own services and driving paid subscription growth, Match decided to buy PlentyOfFish for $575 million in 2015.

Continually acquiring rival companies is not a sustainable approach for revenue growth. Eventually Match.com will just run out of sites to buy.

Even if Match.com wants to buy more companies in 2016, it won't have access to the money it earns from the Match IPO...

Match.com (Nasdaq: MTCH) Remains in IAC's Shadow

IAC/InterActiveCorp (Nasdaq: IACI) will own 86% of MTCH even after 33.3 million shares are sold to the public.

IAC will also almost completely control all shareholder votes.

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"Since IAC will own all the company's "B" shares, which have 10 votes per share, at the end of the day, they'll have 98% of all voting rights," Gilani says. "So don't think that any outsider, any activist, any shareholder, or any executive is going to have a free run at the company."

Aside from owning almost all of the voting power, IAC will also have its hands in Match's IPO money.

Even if the Match IPO raises the $536 million at its highest valuation, Match has to pay IAC $1.2 billion on all acquisitions since 2009.

This means that Match can't use any of the IPO money as working capital. That's a major problem for investors and is one of the reasons investors should not buy into Match stock...

Should You Buy the Match.com (Nasdaq: MTCH) IPO?

Gilani calls Match.com (Nasdaq: MTCH) a trading stock, which means it's not a stock for investors to buy and hold.

Gilani wants to see how Match handles a few quarters as a standalone company.

Money Morning Defense & Tech Specialist Michael A. Robinson also offers a warning to those looking to invest in MTCH just because it is a "hot IPO."

"Too many investors hear of a 'hot IPO' and try to get in on the action without doing any homework at all," Robinson said. "That's a recipe for a hefty loss."

The Match IPO is too risky to purchase because the working capital is limited until Match pays off IAC. But Gilani has a better way to play the Match.com IPO if you want to profit from the $2 billion industry...

"The better way to play Match Group is to buy IAC," Shah stated. "After all, they will own 86% of Match."

Year to date, IACI stock has climbed 7.3%. That compares to a loss of almost 3% for the Dow during the same time.

The Bottom Line: The new Match.com (Nasdaq: MTCH) IPO has generated a lot of hype because of the booming industry and popularity of its sites. But before making an investment in Match.com, it's important to consider the bearish IPO market and the fact that Match Group won't be completely independent from IAC. We recommend waiting for Match.com to prove itself as a standalone company before buying MTCH stock.

Jack Delaney is an Associate Editor for Money Morning. You can follow him on Twitter and follow Money Morning on Facebook.