If you've ever considered investing in the dating app space, you're likely familiar with Bumble (BMBL 1.16%). The company made its public debut in February 2021. Shares are down nearly 60% since its initial public offering.
In this segment of Backstage Pass, recorded on Dec. 13, 2021, Fool contributors Danny Vena, Rachel Warren, Jason Hall, and Asit Sharma discuss the dramatic and fascinating history of Bumble and how it grew to become one of the world's top dating apps.
Danny Vena: For now, we're going to turn the mic over to Rachel who's going to talk to us about a company that, I am a little bit interested in. But I have to be honest. I'm happily married so I'm not dating, but certainly, I am an owner of Match Group stock and have considered Bumble but haven't made the dive yet. Rachel, what can you tell me to change my mind?
Rachel Warren: This is a really interesting company, so I'm going to be talking about Bumble Inc. which IPO'd in February of this year. Before I dive into my slides, I want to give a background on the company and how it came to be because it's a really interesting and rather complicated company history.
I think it lends a lot of understanding to what this company looks like as a potential investment.
Bumble Inc. is the parent company of the Bumble app known for being the app where women get to make the first move. It's also the parent company of an app called Badoo, which is mostly popular in international markets, particularly in Europe. The name Bumble is essentially synonymous with the name of its founder and CEO, which is Whitney Wolfe Herd.
Bumble was not Whitney Wolfe's first dating app enterprise. For anyone who's followed her, she was actually an executive at the well-known dating app, Tinder, previously.
Tinder was launched in 2012, and she was brought over and was Vice President of Marketing at Tinder. At some point, she was also dating the co-founder of Tinder, Justin Mateen, but things went south. She ended up departing Tinder in spring of 2014.
By June, she had filed a lawsuit against Mateen and other leadership at the company. It's since been reported that she reached a settlement with Tinder to the tune of about $1 million dollars in addition to a stake in the company. A very complicated but interesting background within this broader dating app space.
She's feeling really burned at this point, she is not really sure what to do next. She's been contacted by this guy named Andrey Andreev who is a Russian billionaire and CEO of this company called MagicLab.
MagicLab owns a variety of dating apps, including Badoo. Andrey, the Russian billionaire, he essentially convinces Whitney to launch a new dating app. He puts down $10 million.
Jason Hall: We can all relate to that, right. It's happened to all four of us.
Warren: [laughs] Totally. I'm approached by Russian billionaires all the time. [laughs]
Asit Sharma: Yeah. I just make the mistake of ignoring their emails and thinking [laughs] it's spam. Reading her story, I was like, last couple of times, one of them want to get in touch with me. But lesson to learn, read your email, distinguish from the spam.
Warren: Read your emails. Reply to those pitches from Russian billionaires. [laughs]
Vena: Just on a side note now, Tinder is actually owned by Match Group.
Warren: By Match Group, yes. Match Group and Bumble have had a really litigious history as well, which I'm going to touch upon briefly. But basically, this guy, Andrey, he convinces Whitney to launch this new app, she becomes founder CEO, he takes 79% control of the company puts down $10 million. In December of 2014, Bumble was officially launched under the parent company, MagicLab, owned by this Russian billionaire.
Then fast-forward a few years to November 2019, and it's announced that an investment management company called The Blackstone Group is going to take a majority stake in Bumble. That brought MagicLab to evaluation of $3 billion. Andrey, the Russian billionaire, sold his stake, stepped down as CEO. Whitney Wolfe Herd takes the reins as sole CEO and founder of the company.
Vena: You just like saying the phrase, Russian billionaire, don't you?
Warren: I do, but it also makes it really [laughs] easy to differentiate all these characters, it's super dramatic. I was reading through this and I'm like, this reads like some crazy film. [laughs]
Vena: I know. This seems like the movie of the week or something.
Warren: It really does. By July of 2020, MagicLab is renamed as Bumble Inc. At that point, Bumble Inc. is the parent company of Bumble and Badoo. What's interesting is Bumble and Match Group, which owns Tinder, which Whitney originally worked at, they have had a lot of issues between them. Match Group tried to acquire Bumble not once but twice, once in a deal that would evaluate the transaction at more than a billion dollars.
Back in 2018, Match filed a lawsuit against Bumble, alleging that Bumble infringed on its patents with things like swipe features which apps like Tinder were known to have originated. Bumble said that Match's suit was designed to hinder other future acquisitions by keeping companies away. A lot of bad blood between these companies.
Vena: Weren't these features that Whitney had invented in the first place?
Warren: I think some of them were. I mean, some of them are really well known to Tinder, but there are also ones that you see across a lot of dating apps. It's not really individual to that app.
Then Match Group is saying, no, Bumble is trying to drum up a bunch of hype around its IPOs. Just all this litigation back and forth. They finally settled all legal disputes between them in 2020.
