February Long Short - Revisiting Online Dating Platforms
Bumble's Collapse: A New Long/Short Opportunity or a Takeover Target?
Hello Gold Subscribers!
Today, we're revisiting a past Long/Short trade that was previously closed but has now reached an interesting level for reentry.
As of this writing, Bumble is trading at $5.85, down 28% following its quarterly report, which revealed declining revenues despite growing subscriber numbers and significant reductions in stock-based compensation across all segments.
A concerning point regarding Bumble is the turnaround they need to perform in order to refinance their 600M$ Loan Maturing in 2027. Current Interest Expenses are around 5% of outstanding debt which will tend to increase significantly if rates stay higher for longer and the business is not turned around.
Bumble's acquisition of Fruitz proved to be a poor management decision, leaving the company with increased leverage. In 2024, Bumble recorded nearly $900 million in impairment charges related to Fruitz's intangible assets and goodwill.
The company currently holds around $200 million in cash against $617 million in debt.
You can check out the original analysis here:
Relative to its historical mean, a 1:1 long Bumble, short Match portfolio has now reached its lowest point ever.
While some level of bankruptcy risk is being priced in, we believe Bumble faces similar challenges as Match Group. Additionally, at its current valuation, Bumble could be an attractive acquisition target for big tech. Despite the 30% Apple & Google tax on revenues, the company maintains 30% operating margins and strong network effects while trading at just 0.6x revenue, making it a compelling takeover candidate.
This month, we’ll publish a Gold Article reviewing past trades and performance, focusing on the lagging of longer-term L/S strategies. Overall, the portfolio has bounced back to a slight profit after previously peaking at over $12,000 since launch.
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