The appeal of Bumble's (BMBL 0.04%) namesake dating app is that only women can make the first move by initiating contact in pairings that involve a man and a woman. Now we're seeing early investors making the first move by initiating a stock sale.
Bumble announced after Tuesday's market close that 15 million shares will be hitting the market in an underwritten public offering. It's not a dilutive transaction, since no new shares are being printed. It's just affiliates of Blackstone -- who took a majority stake in the company back in 2019 before helping take it public earlier this year -- looking to unload some shares.
The stock still took an initial hit on the news. Investors generally don't react well when a newly public company has a stock offering. Whether it's insiders or early investors moving on or a company taking advantage of a buoyant share price to raise more money at higher price points it's not a positive development. Even Bumble's situation -- with no new shares going out -- can't be spun as a positive. These 15 million shares held by Blackstone affiliates will increase the stock's float even if it doesn't pump up the actual outstanding share count. Naturally all of the proceeds left after the underwriters take their cut will go to the selling parties.
A second date
The timing of the offering isn't ideal. Bumble is trading nicely higher than when it hit the market in February at $43, but the stock is 32% lower than when it peaked on its second day on the market.
It's also easy to wonder if the sellers will come to regret their decision to sell what would be roughly $867 million worth of stock based on Tuesday's close. Bumble hit the ground running seven months ago, and it continues to post impressive growth.
Bumble's revenue soared a better-than-expected 38% in its latest quarter, double the 19% top-line gain it posted for all of 2020. The performance is even better if we focus on Bumble's namesake platform. Revenue for the Bumble app soared 55%, and now accounts for more than two-thirds of its top-line results. An increase in paying users stacked on top of an uptick in average revenue per user is delivering the heady growth. The smaller Badoo app and the rest of Bumble's businesses held the parent company back with a modest 11% year-over-year increase in revenue.
Investors shouldn't mind that the Bumble platform is doing the heavy lifting these days. Its premium users are spending roughly double as much as the paying accounts on Badoo. You also won't hear anyone complaining that Bumble boosted its guidance in last month's quarterly report.
Online dating is a logical market to benefit from the eventual recovery of the pandemic, but Bumble earned its stripes as a growth stock by coming through with double-digit revenue growth in a challenging 2020. Blackstone affiliates selling shares isn't going to be a good look, but there's nothing in the performance metrics that should rattle investor confidence.