On the heels of private companies Robinhood and Databricks each raising $1 billion or more yesterday, Bumble is out with a new IPO filing this morning indicating that it wants to raise 10 figures as well.
The relationship-finding service where women reach out first will go public on the heels of strong public debuts in December by companies like Airbnb, DoorDash and C3.ai with Qualtrics and Poshmark lighting the way in January.
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But at a range of $28 to $30 per share, is Bumble aiming high or low in its valuation and resulting multiples? (For more, check out our first-look at Bumble’s results here.)
Annoyingly, it’s a little tricky to figure out, as the company’s ownership structure and results are messy thanks to a majority-sale to Blackstone back in 2019. So this won’t be entirely clean or simple.
But we’ll get through it. Here’s what we want to know:
- Simple and diluted valuations for Bumble at its current IPO price range.
- What sort of multiples Bumble expects public investors to pay for its shares.
- How those stack up compared to Match Group’s own numbers.
- And, finally, what the Bumble IPO could mean for dating and relationship-focused startups; could this IPO prove that there is lucrative space in the market for more dating products?
So let’s get to work, starting with Bumble’s valuation.
It’s a bird! It’s a plane! It’s a very valuable bee?
Bumble’s simple valuation is just that to calculate, a doddle. At $28 to $30 per share, and Bumble noting that it expects to have 108,384,634 shares outstanding after its IPO, including its full underwriters’ option, the company would be worth $3.03 billion up to $3.25 billion.
But that’s a bit too simple. Bumble’s share count is actually quite a lot higher. For example, if we assume the “exchange of all Common Units held by the Pre-IPO Common Unitholders,” then the company’s share count rises to 189,548,952. At that share count, Bumble is worth $5.31 billion to $5.69 billion. That’s a lot more!
Now things get actually tricky. Our last share count did not take into its confines “any shares of Class A common stock issuable in exchange for as-converted Incentive Units or upon settlement of certain other interests.” So, what are those?
Well, there are 15,197,194 shares tied to different points of compensation, RSUs and more that “will be granted,” to quote the company. We will count those. From there, Bumble has more shares for the future, including 31,000,000 shares tied to its current incentive plan that “may be granted” and another 4,800,000 tied to its employee share purchase plan. We will not count those.
Sticking merely to the stuff we know will be granted, our fully diluted Bumble share count looks to be around 204,746,146 shares, giving the company a diluted valuation of between $5.73 billion and $6.14 billion.
Yes, that was annoying, but it’s important to look at the numbers and see how these things come together. Now let’s examine that final price range with just how much revenue and profit Bumble generates.
Incomes, profits
As before, this is not entirely simple. There are several corporations under discussion inside the Bumble S-1 document, as there were and are various combinations of ownership at play. We care about the successor corp, for which we have data from January 29 of 2020 through the end of that year. And we have data from the predecessor corp for the period of 2020 that predates the successor corp.
Cool. Let’s add them together:
- Predecessor January period: revenues of $39.99 million.
- Successor during the balance of the 2020: $540.5 million (midpoint of guidance).
That sums to $580.49, or what we’ll call $580.5 million. From here we can do some simple math, which tells us that at Bumble’s current IPO valuation range and diluted share count, it expects to be worth around 9.9x to 10.6x revenues.
Those numbers are a little conservative. Normally, we’d use the company’s Q4 revenue estimate, generate a run rate from it, and then use that to calculate revenue multiples. But we don’t have the a Q4 2020 revenue estimate from the company, so here we are. Just presume that those multiples are a touch high.
What about Match?
Sadly, Match reports earnings tomorrow, so all we have to go on are its Q3 2020 numbers this morning. We will make do.
In Q3 2020, Match group had $639.8 million in total revenue, up 18% from the year-ago period. From that it generated an operating margin of 31%, $132.1 million in net income and adjusted EBITDA of $249.2 million. Those are some lovely numbers, really.
At $39.3 billion, Match is worth around 15.4x times its Q3 run rate. That’s far more than what it appears that Bumble wants to command, but as Match has positive earnings before taxes (EBIT) and Bumble does not, it’s an apples:unprofitable apples comparison.
For reference, Bumble grew from revenues of $488.9 million in 2019 to $580.5 in 2020. That’s growth of around 18%, the same figure we saw from Match. So perhaps Bumble should trade at an anti-premium to Match shares. From that perspective, it may not actually be as cheap as it appears.
Regardless, our final question was what we could find in all of this that might augur for startups focused on dating and other forms of relationship generation. I am not walking away from these numbers with endless bullishness about how much room there is left in the market.
Around $3 billion in total spend, held between two public companies, and just 18% growth, doesn’t scream endless market space; niche dating networks will still thrive, but they are by definition TAM-limited and thus probably not too attractive to the VC set.
Let’s see if Bumble raises its range before it prices.