How Bumble Stock was born

If you’ve ever considered investing in the dating app space, you probably know Bumblebee (NASDAQ: BMBL). The company made its public debut in February 2021. Shares are down almost 60% since its IPO.

In this segment of Backstage pass, recorded on December 13, 2021, Fool contributors Danny Vena, Rachel Warren, Jason Hall and Asit Sharma discuss the dramatic and fascinating history of Bumble and how it became one of the best dating apps in the world.

Danny Vena: For now, we’re going to hand over the microphone to Rachel, who’s going to talk to us about a company that interests me a bit. But I have to be honest. I’m happily married so I’m not dating, but certainly I own Matching group stock and have considered Bumble but haven’t taken the plunge yet. Rachel, what can you say to change my mind?

Rachel Warren: It’s a really interesting company, so I’m going to talk about Bumble Inc. which went public in February of this year. Before I dive into my slides, I want to give an overview of the company and its origins, because it’s a really interesting and rather complicated business story.

I think it helps to better understand 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 can take the first step. It is also the parent company of an app called Badoo, which is mostly popular in international markets, especially in Europe. The name Bumble is basically synonymous with the name of its founder and CEO, who is Whitney Wolfe Herd.

Bumble wasn’t Whitney Wolfe’s first dating app venture. For anyone who has followed her, she was actually a former executive on the popular dating app Tinder.

Tinder launched in 2012, and she was brought in and served as VP of Marketing at Tinder. At one point, she was also dating Tinder co-founder Justin Mateen, but things turned sour. She ended up leaving Tinder in the spring of 2014.

In June, she filed a lawsuit against Mateen and other company executives. It has since been reported that she struck a deal with Tinder to the tune of around $1 million in addition to a stake in the business. A very complicated but interesting background in this wider space of dating apps.

She feels really burnt out at this point, she doesn’t really know what to do next. She was contacted by this guy named Andrey Andreev who is a Russian billionaire and CEO of this company called MagicLab.

MagicLab has a variety of dating apps, including Badoo. Andrey, the Russian billionaire, he basically convinces Whitney to launch a new dating app. He deposits $10 million.

Jason Hall: We can all relate to that, can’t we. It happened to the four of us.

Warren: [laughs] Totally. I am 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 his story, I was like, the last two times, one of them wanted to get in touch with me. But lesson to remember, read your email, distinguish yourself from spam.

Warren: Read your emails. Respond to these arguments of Russian billionaires. [laughs]

Vein: Just by the way, Tinder is actually owned by Match Group.

Warren: By Match Group, yes. Match Group and Bumble have also had a very contentious history, which I’ll touch on briefly. But basically this guy, Andrey, he convinces Whitney to start this new app, she becomes the founding CEO, he takes 79% control of the company and deposits $10 million. In December 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 will take a majority stake in Bumble. This brought MagicLab to a valuation of $3 billion. Andrey, the Russian billionaire, sold his stake and resigned as CEO. Whitney Wolfe Herd takes the reins as sole CEO and founder of the company.

Vein: You just like saying the phrase, Russian billionaire, don’t you?

Warren: I do, but it also really makes it [laughs] easy to differentiate all these characters, it’s super dramatic. I was reading this and I’m like, this reads like a crazy movie. [laughs]

Vein: I know. It looks like movie of the week or something.

Warren: It really is. In July 2020, MagicLab is renamed Bumble Inc. At this point, Bumble Inc. is the parent company of Bumble and Badoo. Interestingly, Bumble and Match Group, which owns Tinder, which Whitney originally worked for, they had a lot of issues with each other. Match Group tried to acquire Bumble not once but twice, once in a deal that would value the deal at over $1 billion.

In 2018, Match filed a lawsuit against Bumble, alleging Bumble infringed on its patents with things like swiping features that apps like Tinder were known to originate. Bumble said Match’s lawsuit was designed to hinder other future acquisitions by alienating the companies. Lots of bad blood between these companies.

Vein: 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 from Tinder, but there are also some that you see in a lot of dating apps. It’s not really individual to this app.

Then Match Group says, no, Bumble is trying to build a whole lot of hype around its IPOs. Just all this litigation back and forth. They finally settled all legal disputes between them in 2020.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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