The Match.com IPO price was set at $12 per share last night (Wednesday), and the company will sell 33 million shares.
The Internet dating and education provider should raise roughly $396 million, giving the company a valuation of $2.9 billion. This is roughly $800 million short of analysts’ expectations from a year earlier.
Match.com (Nasdaq: MTCH) will now operate independently from parent company IAC/InterActiveCorp (Nasdaq: IACI). IAC has spun off six publicly traded companies in the last decade. Lending Tree Inc. (Nasdaq: TREE) stock, one of IAC's spin-offs, has climbed more than 98% since Nov. 18, 2008.
Despite the spin-off, Match.com will still have strong connections to its former parent company. IAC will keep at least 84% of Match.com stock and control 98% of the voting rights. Match.com will use the IPO proceeds to repay party-related debt owed to IAC.
Match.com's aggressive acquisitions are the reason it will have to repay $1.2 billion to IAC. In the last six years, Match Group has acquired 25 different brands for a total cost of $1.3 billion.
Those acquisitions signal the changing profitability of online dating services...
You see, online dating is losing its negative stigma. The Pew Research Center found that in 2013, 59% of those surveyed believed that online dating was a good way to meet people. That's a drastic increase from the 44% who agreed in 2005.
Even without an official Match.com IPO price, investors are still drawn to this leader in the online dating industry...
Match.com IPO Price Based on Booming $2 Billion Industry
Through all of its holdings, Match Group boasts 59 million monthly users (including $4.7 million paid subscribers). Its dating services are provided in 38 languages with a reach into 190 countries.
As recently as October, Match Group acquired competitor PlentyOfFish for $575 million. Match Group also holds Tinder and OkCupid in its portfolio of 45 total brands.
[mmpazkzone name="in-story" network="9794" site="307044" id="137008" type="4"]
Match Group became so dominant because it offers a wide variety of mainstream and niche dating sites. And with Financial Times reporting that the online dating industry is worth roughly $2 billion, the MTCH stock price has plenty of potential...
Match Group is also posting impressive profit and revenue growth. Match.com reported revenue in 2014 of $888.2 million, a 10.6% increase from 2013. More importantly, Match's profit grew from $90.3 million in 2012 to $148 million in 2014.
These numbers may lure investors who don't do their due diligence, but Money Morning readers need to know that Match.com is still heavily under the shadow of IAC. Match will not be able to use the money generated from the Match.com IPO as working capital. It will have to pay IAC back for all of the acquisitions, such as PlentyOfFish.
The acquisition costs have placed Match in debt to IAC, but this also means Match.com may have a problem with innovation. Instead of improving services and gaining more users on its flagship sites, Match instead simply purchases the competition.
But because this is one of the biggest tech IPOs of 2015, many investors are wondering how to best play the Match.com IPO. Here is Money Morning's three-step strategy for investing in MTCH stock...
Jack Delaney is an Associate Editor for Money Morning. You can follow him on Twitter and follow Money Morning on Facebook.