The co-founders and early employees of the popular dating site Tinder have filed a lawsuit against owner IAC/InterActiveCorp and its Match Inc subsidiary, claiming IAC conspired to cheat the plaintiffs out of billions of dollars in stock options.
The suit, (read it here), filed Tuesday in the New York State Supreme Court in Manhattan, said IAC and Match deliberately offered “false, misleading and incomplete financial information and projections” in order to keep Tinder’s value low, thereby limiting its equity exposure. The lawsuit says IAC and Match downplayed Tinder’s success in private to lower the valuation but boasted about it in public when it helped the stock price, so “Defendants could enrich themselves by talking out of both sides of their mouths.”
Former CBS Interactive Chief Jim Lanzone Connects With Tinder As New CEO
The 10 plaintiffs include Tinder co-founders Sean Rad and Jonathan Badeen. They are seeking at least $2 billion in damages and a jury trial.
IAC and Match issued a statement, calling the allegations in the suit “meritless,” and pledging to “vigorously defend” against the claims in court.
“Since Tinder’s inception, Match Group has paid out in excess of a billion dollars in equity compensation to Tinder’s founders and employees,” the companies said in a statement to Deadline. “With respect to the matters alleged in the complaint, the facts are simple: Match Group and the plaintiffs went through a rigorous, contractually defined valuation process involving two independent global investment banks, and Mr. Rad and his merry band of plaintiffs did not like the outcome.”
IAC and Match note that Tinder has experienced enormous success since the departures of Rad and Badeen, “but sour grapes alone do not a lawsuit make.”
According to the suit, the 10 plaintiffs were given stock options by IAC in May 2007 worth about 20% of the company, which is now fully owned by IAC subsidiary Match Group Inc. But the corporate entities created “a false picture of Tinder’s financial condition and prospects” in private, giving it a “lowball” $3 billion valuation in 2014, then merged it with Match Group and replaced then-CEO Rad with Match CEO Greg Blatt, whom the suit describes as a “longtime lackey of IAC’s controlling shareholder Barry Diller.”
“Only hours after finalizing their $3 billion valuation, Defendants merged Tinder out of corporate existence — without the prior knowledge or consent of Tinder’s Board or any of the Tinder Plaintiffs,” the suit reads. “Through this pretextual merger, Defendants stripped away the Tinder Plaintiffs’ options in Tinder, cancelled the three remaining Scheduled Puts in 2018, 2020 and 2021, and purported to terminate the Agreements.”
It added: “Having guaranteed the Tinder Plaintiffs four independent valuations and opportunities to ride Tinder’s growth years into the future, Defendants permanently deprived them of the money they had earned.”
The site and app’s success helped Match shares recently touch near-record highs earlier this month after reporting second-quarter results fueled by Tinder’s growth thanks to the successful Tinder Gold subscription service. It added 299,000 subscribers during the quarter, well above Match’s own estimates. It now has 3.8 million subs, up 1.7 million year-over-year.
“During the  valuation, Defendants said that Tinder would earn $454 million in 2018 revenue,” the suit reads. “Last week [during the Q2 earnings call], Match announced that Tinder is on pace to exceed $800 million revenue in 2018 … more than 33% higher than Defendants projected even for 2021 revenue.”
The suit claims breach of contract, breach of good faith and fair dealing, and unjust enrichment against IAC and Match; and interference with contractual relations against Match, which runs Tinder and other dating sites including Match.com, OKCupid and Hinge.
Subscribe to Deadline Breaking News Alerts and keep your inbox happy.