Hinge operator Match Group repair itself or go non-public

Starboard Value has amassed a roughly 6.5% stake in online dating company Match Group and is pushing the company to either make changes that would improve margins or go private.

Starboard’s Jeff Smith wrote, in a letter on Monday to Match CEO Bernard Kim and its board, that cost cuts and product innovation could drive revenue growth at the company. Smith has been speaking with Match management about its plans, according to the letter, which was viewed by CNBC.

Shares of Match, which owns a portfolio of dating apps including Tinder and Hinge, have slid 12% this year, and are more than 80% below their high reached in 2021. The company has been grappling with leadership turnover and declining users.

The stock surged nearly 9% in extended trading on Monday after the Wall Street Journal reported on Starboard’s stake.

In the letter, Smith wrote that Tinder enjoyed enviable and viral growth for years but has been stymied of late by sluggish innovation. The activist isn’t angling towards a management shakeup and indicated that Kim, who previously ran Tinder and before that was president of Zynga, is capable of leading innovation at the company.

However, the activist says any turnaround would require margin improvements. In the first quarter, Match’s operating income margin shrank to 21% from 25% a year earlier. Adjusted operating margin came in at 33%, a number that Starboard said could top 40% if the company implements the right cost-saving initiatives.

Starboard highlighted strong growth in Hinge as well as promising signs from the company’s “Emerging” apps portfolio. But if Match is unable to more broadly turn around its business, the company should consider going private, Smith said.

Starboard also urged the company to put its balance sheet to work with share buybacks.

A Match spokesperson said in an emailed statement that the company is in communication with Starboard and other investors.

“We are relentlessly focused on executing our key initiatives, which include: driving growth at Tinder, continuing Hinge’s impressive expansion, maintaining appropriate financial discipline, and returning capital to our shareholders,” the spokesperson said.

Starboard isn’t the first activist to put pressure on Match. Elliott Management amassed a billion-dollar stake in the company earlier this year, while Anson Funds is also mounting a push at the company. Elliott settled with the company, adding two directors to the board.

Starboard has a successful track record as an activist, particularly in technology. It’s taken positions in GoDaddy, Autodesk, Salesforce and Splunk. Salesforce made significant cost cuts after a number of activists, including Elliott, took stakes in the software company. Splunk was acquired by Cisco in a $28 billion deal last year.

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