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.
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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.