Please ensure Javascript is enabled for purposes of website accessibility

Why IAC Keeps a Foot in the Door of Match Group

By Motley Fool Staff – Jul 19, 2016 at 11:16AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Match Group's spin-off from IAC was unconventional. In this clip we discuss why IAC would want to maintain an interest in Match Group given its growth potential, while also allowing investors access to the online-dating segment.

In this segment from the Industry Focus: Tech podcast, Motley Fool analysts Dylan Lewis and Sarah Priestley explain the context around IAC's (IAC) spinoff of Match Group (MTCH), and why the move wasn't just a company tying its debt to a bad business and throwing it all away. 

A transcript follows the video.

A secret billion-dollar stock opportunity
The world's biggest tech company forgot to show you something, but a few Wall Street analysts and the Fool didn't miss a beat: There's a small company that's powering their brand-new gadgets and the coming revolution in technology. And we think its stock price has nearly unlimited room to run for early in-the-know investors! To be one of them, just click here.

This podcast was recorded on July 8, 2016.

Dylan Lewis: Match really hasn't been directly public for a long time. As I alluded to, they were nested under this publicly traded IAC up until last fall. They only recently sprung off. I think there are a couple different reasons for that. When we were prepping for this show, you talked about the idea that they wanted to separate financials due to debt. Do you want to touch on that a little bit?

Sarah Priestley: Yeah. When they bought PlentyOfFish, I think they added $575 million of debt. As a result, Moody's downgraded IAC, which meant Barclays analysts downgraded the stock, and all those kinds of things. I don't know the necessarily that played into the decision, but I imagine it was part of the discussion, certainly, because when they spun off Match, they spun off that debt responsibility onto a different entity. Your opinions on this, and I completely agree with you, is that this isn't necessary their offloading bad wood. To a certain extent, I think it's just they just want to allow investors a way to invest in the market, and they retain 85% of shares, 98% of voting interest. They clearly want to keep a foot in the door with online dating.

Lewis: Yeah, when you hear "spin off," sometimes you think, this is a company just bailing on a bad business. You look at what IAC decided to do with a spinoff, like you said, they're retaining 85% and 98% of the voting interest. I mean, it's clear that they think this is a really great business. They wouldn't be holding on to that much of it if they didn't think that. This is kind of like how you see a founder-led business that the CEO and founder still owns 20% of the company after going public. It's one of those things, as Fools, that we really like, because it shows they have skin in the game. They may be going public, they may be accessing some capital, but they want to see this business succeed as much as investors do.

Dylan Lewis has no position in any stocks mentioned. Sarah Priestley has no position in any stocks mentioned. The Motley Fool recommends Match Group and Moody's. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Stocks Mentioned

IAC/InterActiveCorp Stock Quote
Match Group Stock Quote
Match Group

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.