Dating app Bumble (NASDAQ:BMBL) caused a stir last week when it made its stock market debut. The seven-year-old company has come along way in its brief life. But most impressive of all was that the Bumble IPO marked a major milestone for Wall Street. That’s because Bumble’s founder Whitney Wolfe Herd became the world’s youngest female Billionaire at 31 years of age.
While it makes for a great story, does the company have staying power? And does Bumble look like a good investment for the long-term?
What is Bumble?
Bumble is a social networking platform. It’s centred around a dating app with the same name, but also offers a business networking platform called Bumble Bizz and a friendship forming division called Bumble BFF.
Its’ unique selling point is that it puts women first. This was the premise behind ‘women making the first move’ in the design of the dating app and its subsequent spin offs.
Wolfe Herd founded the company in 2014 and it now has over 100 million users and is present in 150 countries. The platform has been built on the philosophy of kindness, respect, and equality for all. Bumble has zero tolerance for hate, aggression, or bullying. It also holds its users accountable for their actions.
Bumble’s share price rockets on IPO
Bumble’s stock market debut was big news in response to Wolfe Herd billionaire status, but it also experienced an impressive price surge. As seems to be commonplace in the US markets lately, IPO day generates serious investor interest for attractive brands (think Airbnb, DoorDash & Snowflake). This is partly fuelled by the rise of the retail investor.And Bumble didn’t disappoint. On February 10, Bumble shares debuted to institutional investors priced at $43. But on public inclusion the next day, they shot up to $76. Thus, bestowing Bumble with a company valuation of $13 billion.
Operating in a competitive space
Becoming publicly listed pitches Bumble in direct competition with industry heavyweight Match Group (NASDAQ: MTCH). Match has a portfolio of brands that include Tinder, Match, Meetic, OkCupid, Hinge, Pairs, PlentyOfFish, and OurTime.
The Match Group has a market capitalisation of $44 billion. Match recently initiated plans to purchase the South Korean video chat company Hyperconnect for $1.7 billion. This will help cement its footprint in Asia and further expand its customer base.
In June last year, Match and Bumble reached a litigation settlement without disclosing any details. The two had been embroiled in legal action involving allegations of patent infringement and theft of trade secrets. Prior to this, Bumble accused Match of attempts to buy, clone and intimidate the company. The price of Match Group’s stock has been falling since the Bumble IPO day.
Is competition on the rise?
Bumble’s success is spurring others to follow suit. The day after Bumble’s IPO, OkCupid co-founders launched a $230 million IPO via a special acquisition company (SPAC). OkCupid’s co-founder Sam Yagan is the former CEO of Match Group and serial entrepreneur.
The SPAC, named Corazon Capital V838 Monoceros Corp, is expected to launch on the NASDAQ under ticker CRZNU. Shares will eventually trade under CRZN and warrants under CRZNW. The SPAC target hasn’t yet been confirmed, but the S-1 filing submitted to the US Securities and Exchange Commission (SEC) stated online dating could be a potential area of acquisition.
“We chose the name “Corazon” ?(the Spanish word for “heart”) superficially as an homage to my time spent in the online dating industry, but more deeply for its denotation of “courage,” “spirit,” and “compassion,” three of the most important qualities not only of successful founders, but also of the types of leaders—of humans—we wanted to invest in.”
“We will look for opportunities with certain business attributes or in certain categories, including, but not limited to, businesses with consumer-facing technology, subscription or recurring revenue models, marketplaces and networks, or that operate in sectors such as education, social media and dating, and ecommerce.”
How does the future look for Bumble?
The fact Bumble has several facets to its business model should stand it in good stead going forward. It doesn’t just capture the singles market; it also keeps users interested from a business networking point of view and a social friendship extending angle too.
Many women find it difficult to make friends after moving on from school and college. Particularly if working remotely in different parts of the country. And having children can create a lonely time for women too. The Bumble BFF app offers a way out of this and unique way of finding friends that you actually have something in common with.
Online dating is a growth area that knows no bounds. It’s recession-proof and appeals to people the world over from all walks of life and age groups. It can also be highly lucrative.
Bumble has taken a stance on kindness and respect, which is severely lacking in competitive parts of the sector. That could stand it in good stead going forward as more and more women and men seek out a safer space to connect with respect.
However, it’s important to remember this is a highly competitive space and a high valuation can be hard to maintain in the cut-throat world of wall street if things don’t quite go to plan.
Is Bumble overvalued after IPO?
Bumble plans to use the $2.2 billion it raised through the IPO to pay off debt, fund its international expansion plans, and pursue further acquisitions.
Mad Money host and tv stock pundit Jim Cramer commented on the Bumble IPO:
“If you’re a growth-oriented investor, Bumble’s the way to go…if you’ve got a more cautious approach to the market and you still want an online dating stock, Match is the way to go.”
A strong management team, with the future of the business at heart, is something long-term investors look for. Wolfe Herd certainly displays passion and conviction in her strength of belief in Bumble and all it stands for.
In an internal Slack memo sent to Bumble staff she said:
“Don’t watch the stock, watch customer feedback and growth, pay attention to success stories and customer complaints… We are not perfect but every single day is an opportunity for us to improve. Let’s remain humble, kind and collaborative. Tomorrow’s success isn’t promised, and it is our character and values that will hold us together through the ups and downs ahead.”
Bumble could be a potential gold mine with considerable room for growth, or it may already be priced for perfection and poised to take a tumble. Time will tell.