Stock Story -
What Happened: Shares of dating app company Match (NASDAQ:MTCH) jumped 9.9% in the pre-market session after activist investor Starboard Value revealed a 6.6% stake (roughly 17.6 million shares) in the company and pushed for a potential sale if a turnaround can't be achieved. According to the letter released by Starboard "Match is a high-quality business in a secularly growing industry and is deeply undervalued."
As a result, the activist investor outlined value-creation opportunities. Starboard proposed a more accelerated share buyback program and recommended using 75% or more of free cash flow, plus additional borrowing capacity, to buy back shares. This will be catalyzed by the recommendation to boost growth (address issues with Tinder and capitalize on growth at Hinge) and operating leverage. Overall, the news highlights the hidden value that can be unlocked by Match in the coming quarters.
Is now the time to buy Match Group? Find out by reading the original article on StockStory, it's free.
What is the market telling us: Match Group (NASDAQ:MTCH)'s shares are quite volatile and over the last year have had 8 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 6 months ago, when the company gained 10.6% after The Wall Street Journal reported that Elliott Investment Management acquired a significant stake of about $1 billion in the company (a nearly 10% position prior to the move). The hedge fund plans to engage with Match Group to enhance its stock performance just as the market seems worried about declines in paying customers.
This move is notable given Elliott’s track record for activist campaigns that often bring about significant changes in target companies, focusing on aspects like improving asset monetization, expense efficiency, and stock buybacks among other changes.
In our December research report exclusive to members of StockStory Edge we took a firm view that the market was misunderstanding MTCH’s subscriber decline and was too negative on the stock. Our research showed that given Match Group’s dominant brands and scale, the company could not only grow paying customer numbers again but also better monetize other assets. It is comforting that another professional investor in Elliott is likely seeing what we saw just last month and we are expecting more to follow in the future.
Match Group is down 4.1% since the beginning of the year, and at $34.90 per share it is trading 28% below its 52-week high of $48.49 from July 2023. Investors who bought $1,000 worth of Match Group's shares at the IPO in June 2020 would now be looking at an investment worth $330.32.
