Bumble IPO filing details $125m cash payout and loan to founder

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Bumble founder Whitney Wolfe Herd received a $125m payout following a complex reorganisation of the dating app’s parent company, according to a regulatory filing ahead of its initial public offering.

Details of Ms Wolfe Herd’s financial arrangements with the company, including a $119m loan to an entity she controlled, are contained in an IPO prospectus published on Friday.

The prospectus also showed that Bumble Holdings, which owns Bumble and the Europe-centric dating app Badoo, swung to a loss and grew at a slower pace following the reorganisation led by the private equity group Blackstone in 2019.

Bumble has touted a focus on the experience of women on its dating apps, tapping into the growing market for online matchmaking services. The company reported 42.1m monthly active users across Badoo and its namesake app at the end of September, of which about 2.4m were paying users.

But the company’s growth has slowed since Blackstone agreed to purchase a majority stake in 2019 and installed Ms Wolfe Herd as chief executive, following allegations of a toxic work environment under former head Andrey Andreev.

Mr Andreev exited the company, previously known as MagicLab, and sold his stake as part of the deal, Blackstone said at the time. The investment valued Bumble’s parent company at about $3bn.

Ms Wolfe Herd received a cash payout of $125m as a result of the Blackstone-led deal, according to the filings. Bumble also loaned $119m to an entity controlled by Ms Wolfe Herd. She settled the remainder of the loan this month.

Corporate governance experts usually warn against such transactions, which can raise questions about conflicts of interest. WeWork drew a backlash for similar related party transactions during its attempted public offering in 2019.

Blackstone, the venture capital group Accel, and Ms Wolfe Herd are expected to maintain voting control over Bumble after the IPO.

In a move that is common for private equity-owned companies, Bumble will also be structured as an umbrella partnership corporation that gives tax benefits to insiders. New shareholders will purchase stock in a holding company, Bumble Inc, with a controlling interest in Bumble Holdings.

The IPO filing comes on the back of a strong market for new US listings, after shares in other consumer tech companies such as Airbnb and DoorDash surged from their IPO prices.

The listing will heighten the rivalry between Bumble and the dominant player in dating apps, Match Group, which owns Tinder, OKCupid and its namesake Match.com. The two companies were recently embroiled in a legal battle over allegations of patent infringement and the stealing of trade secrets, before settling all litigation last year.

Bumble also faces increasing competition in the matchmaking industry as social media group Facebook rolls out its own dating service to its 2.7bn users.

Bumble reported net losses of $117m in the first nine months of last year, a reversal from positive earnings of $69m during the same period in 2019, but a figure that the company said was affected by transaction costs.

Growth slowed last year. In the first nine months of 2020, Bumble reported revenues of $417m, an increase of 14.9 per cent from the same period in 2019, but slower than the 35.8 per cent revenue growth it reported from 2018 to 2019.

Bumble reported 2020 financials in two sections to reflect a change in corporate structure following the completion of the Blackstone-led reorganisation.

The company said it would use IPO proceeds largely to pay down debt and repurchase equity interests from private shareholders. Goldman Sachs and Citigroup are serving as lead underwriters on the offering.

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