Diller’s IAC Fooled Tinder Founders Over Fake Growth, Lawyer Says

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The founders of the popular dating app Tinder LLC have been duped by Barry Diller’s IAC / InterActiveCorp. and Match Group Inc. believing Tinder to be much less valuable than it actually was, robbing them of $ 2 billion, a lawyer told a New York jury.

“When the time came to pay the men and women who built this business what they owed just what they were contractually obligated to pay, the defendants in this case conspired to create a bogus story about future growth. of Tinder so that they ‘I don’t have to pay,’ Josh Dubin, lawyer for the founders of Tinder, said Monday at the start of a trial in state court.

The legal battle for compensation began with a 2018 lawsuit by Tinder co-founders Sean Rad and Justin Mateen, who accused Match and its controlling investor, IAC, of ​​deceiving them into undervaluing the company to $ 3 billion when it was actually worth $ 13 billion.

While Tinder’s ‘swipe right’ and ‘swipe left’ system to check potential dates has made it one of the most popular mobile apps of the past decade, the lawsuit has revealed acrimony within companies that have helped finance its development. IAC and Match said Rad destroyed evidence and paid former workers to support his lawsuit. Rad accused them of covering up allegations of sexual misconduct by former Match general manager Greg Blatt, who filed a separate defamation complaint.

The prospect of an “unpredictable” outcome of the lawsuit creates risks for Match, which has agreed to pay IAC’s liability in this case, said Tom Claps, litigation analyst at Susquehanna Financial Group in New York. Tinder’s plaintiffs are seeking more than $ 2 billion in damages, and Match had approximately $ 236 million in cash as of June 30, Claps said.

If Blatt, Diller and Rad testify as expected, “there is the potential for test fireworks that could lead to negative headlines for IAC / MTCH and could cause them to seriously consider a settlement,” Claps wrote in a note to customers. This will likely lead to a settlement of $ 300-700 million before the jury returns their verdict, the analyst said.

“Leaving that to a jury is inevitably a bit of a roll of the dice” for Match, said Matthew Schettenhelm, litigation and government analyst at Bloomberg Intelligence. “With such large sums potentially at stake, this may not ultimately be a risk the company wants to take.”

IAC and Match hired famous litigation attorney Bill Carmody, who helped WeWork founder Adam Neumann secure a $ 480 million settlement from SoftBank Group Corp. technology.”

The plaintiffs, including other executives and early employees of Tinder, say they were granted options in 2014 by IAC and Match that entitled them to more than 20% of the company. Since Tinder was unlisted, IAC and Match had to hire investment banks to estimate its value on four specific dates: May 2017, November 2018, May 2020, and May 2021.

According to the lawsuit, IAC and Match engineered a low-valued valuation of the company by providing false information to banks, then merged Tinder into Match within hours of the first valuation in 2017, terminated options agreements, and rescinded claims. additional payment dates.

Tinder was “one of the most successful tech companies in the world” in July 2017 and had “literally taken the world by storm,” Dubin told jurors. But while Blatt told the public on a Match results call in November 2016 that Tinder was a “rocket,” when it came time to assess the company, he sang a different tune, Dubin said. .

The jury will see “astonishing evidence of lies, deception, intimidation and cheating to support this bogus story” with the bankers, that “the rocket was going to crash and burn,” Dubin said.

Match declined to comment. In court records, IAC and Match said banks determined Tinder’s value based on information from both parties and that plaintiffs raised $ 700 million when they exercised their options, including $ 400 million. for Rad. IAC and Match said the former Tinder executives were bitter because they cashed in too soon.

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