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Tinder CEO’s comments complicate Match’s debut

Barry Diller on Match IPO: I'd use a dating app
Barry Diller on Match IPO: I’d use a dating app

First impressions matter — in the dating world as well as the financial one.

Tinder owner Match Group(MTCH) begins its relationship with Wall Street on Thursday when it debuts as a public company on the Nasdaq.

The owner of dating sites including Match.com and OkCupid plans to sell more than 33 million shares at a range of $12 to $14 apiece. At the midpoint, the deal would raise $433 million and value the company at $3.1 billion.

Match, which will trade under the ticker symbol “MTCH,” is clearly hoping to cash in on the rising popularity of online dating among Millennials. Over the past four years, Match’s sites have grown their active users by 63% a year, giving thecompanya total of nearly 60 million.

At the “heart” of that growth is Tinder, the popular yet controversial app that has exploded onto the online dating scene. Tinder famously lets users swipe right if they like a prospective date and left if not.

Online daters have been doing a ton of swiping lately. Match said Tinder users swiped through an incredible 1.4 billion user profiles each day in September. But critics argue Tinder promotes a culture of “hooking up” instead of real relationships.

Related: Billionaire Barry Diller: I’d use a dating app

Unlike Square, Match is making money

Match’s first date with Wall Street is actually more of a double date. It coincides with the high-profile debut of Square, the mobile payments company started by Twitter(TWTR, Tech30) CEO Jack Dorsey. Square’s(SQ) IPO could end up pricing the company at a big discount from where it was last valued in the private markets.

But unlike Square, Match is already profitable. The company earned $85 million in the first three quarters of 2015 and its revenue rose 16% thanks to a rise in paid customers.

“Match has an unbelievable profitability profile,” said Kathleen Smith, a principal at Renaissance Capital, which manages IPO-focused ETFs.

Related: Square IPO looks like it’s out of shape

Could Tinder ‘cannibalize’ Match?

But Smith said investors need to be mindful of the “erosion” Match has experienced in the revenue per paid subscriber. That key metric has declined each of the past three full years and is down so far in 2015 as well.

These concerns have led some analysts to warn that Match is nothing but trouble for investors.

BTIG analyst Brandon Ross wrote in a research report that the “explosive growth of online daters with free profiles, particularly from Tinder, is cannibalizing the rest of the business.”

He dubbed this phenomenon the “Tinder Catch-22,” suggesting subscriber losses will continue in the non-Tinder side of Match’s business.

Smith thinks that criticism doesn’t give Match enough credit for developing Tinder in house.

“This is a management team that has something going for it if they can pull off a Tinder. They’re not just buying sites,” she said.

Related: Swipe right or left on Tinder/Match and Square IPOs?

Can Match avoid the fate of GoPro?

Match is going public at a time when investors have ramped up scrutiny of unproven companies. Shares of a number of newly-public companies have taken big tumbles, including Alibaba(BABA, Tech30), Fitbit(FIT), Etsy(ETSY) and Shake Shack(SHAK). The clearest example is GoPro(GPRO, Tech30), which last week fell below its IPO price.

Prior to the IPO, Match was part of IAC/Interactive(IACI), the conglomerate run by media mogul Barry Diller. IAC has previously spun off a number of brand-name companies, including Expedia(EXPE), TripAdvisor(TRIP) and HSN(HSNI).

Related: Square IPO price signals tech startups may be overvalued

Related: Snapget gets a 25% markdown from big investor

CNNMoney (New York) November 18, 2015: 4:49 PM ET

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