- A group of 10 current and former Tinder employees are suing the dating app’s parent company, IAC, for $2 billion.
- They allege IAC purposely undervalued the startup to devalue early employee options.
- Tinder was founded as part of an IAC-owned incubator, and conflicts over its ownership structure and its founders’ equity stakes go back to the founding of the company, according to the complaint.
- IAC said that the “allegations in the complaint are meritless, and IAC and Match Group intend to vigorously defend against them.”
A group of early Tinder employees, including cofounders Sean Rad, Justin Mateen, and Jonathan Badeen, announced on Tuesday that they had filed a lawsuit against InterActiveCorp and Match Group, the owners of Tinder.
They’re alleging that IAC used a lowball valuation based on false information to reduce the value of stock options that early employees and founders held. The plaintiffs are seeking at least $2 billion.
The Tinder team received written contracts in 2014 outlining stock options as well as four dates they could exercise them, according to Tuesday’s complaint.
But they allege that ahead of the first exercise date, in May 2017, IAC valued Tinder at $3 billion and merged it with Match, which “stripped away” the team’s options in the fast-growing dating app, leaving them with less valuable Match options.
They also say that IAC put its own financial executive inside Tinder, Greg Blatt, who concluded that Tinder was worth less than the Tinder team thought it was. The valuation is important because although Match is a publicly traded company, Tinder was not, which meant that the valuation process directly affected how much the founders' options were worth.
"The reason for these management changes was clear: to allow defendants to control the valuation of Tinder and deprive Tinder optionholders of their right to participate in the company's future success," according to the complaint.
The suit also alleges that Blatt, the former IAC chairman and CEO, groped Rosette Pambakian, Tinder's VP of marketing and communications, at a Tinder holiday party in 2016, shortly after Blatt took over as interim CEO.
Tinder operates independently on a day-to-day basis from IAC and Match, according to the complaint, and it's based in Los Angeles. Tinder was founded in an incubator, Hatch Labs, that was majority-owned by IAC. Conflicts over its ownership structure and its founders' equity stakes go back to the founding of the company, according to the complaint.
The group of early Tinder employees are represented by Orin Snyder of the firm Gibson Dunn, who famously argued Apple's case in an e-book price-fixing lawsuit.
When reached by Business Insider, IAC and Match Group provided this joint statement:
"The allegations in the complaint are meritless, and IAC and Match Group intend to vigorously defend against them.
Since Tinder's inception, Match Group has paid out in excess of a billion dollars in equity compensation to Tinder's founders and employees. 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. Mr. Rad (who was dismissed from the Company a year ago) and Mr. Mateen (who has not been with the Company in years) may not like the fact that Tinder has experienced enormous success following their respective departures, but sour grapes alone do not a lawsuit make. Mr. Rad has a rich history of outlandish public statements, and this lawsuit contains just another series of them. We look forward to defending our position in court."
Here's the full list of Tinder employees and former employees suing IAC and Match:
- Jonathan Badeen, Co-Founder & Chief Strategy Officer, March 2012 to Present
- Paul Cafardo, Director of Engineering, April 2013 to June 2017
- Gareth Johnson, Lead Designer, February 2014 to June 2017
- James Kim, Vice President of Finance, February 2016 to Present
- Alexa Mateen, Head of U.S. Expansion, May 2012 to May 2015
- Justin Mateen, Co-Founder & Chief Marketing Officer, February 2012 to September 2014, Strategic Advisor from September 2014 to 2017
- Joshua Metz, Director of Marketing, June 2013 to Present
- Ryan Ogle, Chief Technology Officer, August 2012 to June 2017
- Rosette Pambakian, Vice President of Marketing/Communications, March 2014 to Present
- Sean Rad, Co-Founder, CEO, President, & Chairman, February 2012 to September 2017
Here's the full complaint: