Analysts at The Motley Fool have questioned a Match Group decision to pay out $560 million in a ‘special dividend’.
Chris Hill and David Kretzmann argue that the company will likely need to take on more debt to pay the dividend, adding to the $800 million it already owes.
Kretzmann says the core business is performing well, with Tinder growing its number of subscribers and revenue in each quarterly report. At $2 per share, however, the dividend could rock the company’s finances.
They speculate that it may be an “underhanded” way to pay back IAC, which owns around 80% of MTCH stock.
Match makes the case that this debt is not a concern, likening itself to Netflix. The comparison falls flat for the analysts, however, as Netflix takes on debt to finance expansion rather than to pay dividends.
The Tinder umbrella’s stock has tumbled in the past 10 weeks, from an all time high of $60.05 in mid September to a current price of $36.26. It’s valuation may fall below $10 billion by the end of this month.
On Wednesday, Zacks Investment Research moved Match Group from a “strong buy” to a “hold”.
Their analysis reads: “Robust momentum at Tinder and sturdy synergies from Meetic, Match and PlentyOfFish bodes well for the company. (…) Notably, shares of the company have outperformed the industry in the past year.
“However, weaker-than-expected advertising revenue growth trends might dent the company’s financial performance. Further, profits might be affected due to higher investments in Tinder along with higher-than-expected data costs and professional fees.”
Chief Product Officer Brian Norgard recently announced his departure, citing a wish to return to his entrepreneurial roots and invest in LA startups.
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