Match Group has agreed to pay the founders of Tinder $441m to settle a lawsuit in which the dating app’s founders claimed the media empire run by Barry Diller had cheated them out of the fortune created from one of the hottest digital media properties in recent years.
The settlement comes in the middle of a trial in New York state court, where Sean Rad and several others who had built Tinder in Los Angeles a decade ago had asked a jury to award them more than $2bn from Match and its former corporate parent, IAC.
The court proceedings over the past three weeks had featured testimony from Rad, Diller and others involved in a 2017 transaction that bought out the founders, who collectively held a stake equal to a fifth of Tinder, for roughly $600m, implying an aggregate valuation of Tinder at $3bn.
Rad and the founders later sued, arguing that the app was really worth $13bn at the time. The founders claimed Match and IAC executives had privately acknowledged Tinder was worth far more than the buyout valuation of $3bn and had even compared its trajectory with the likes of Uber and Twitter.
Rad and his team had initially developed Tinder at Hatch Labs, a technology incubator that IAC had sponsored to build internet start-ups. In 2014, Rad negotiated a deal in which Tinder was granted “put” options where they could sell back their interest in the company to IAC at four specified intervals starting in 2017 and ending in 2021.
After the first put process in 2017, where independent investment bankers valued Tinder at $3bn, IAC immediately merged Tinder into the broader Match company, cancelling the future put events and forcing Rad and the founders to accept the $3bn valuation.
Match Group, which now includes Tinder and several other dating sites, has since seen its enterprise value soar to as much as $50bn. Wall Street analysts ascribe the majority of that figure to Tinder.
Match and IAC had argued that Rad — who immediately sold the IAC shares his Tinder equity had converted to in 2017 — suffered from “seller’s remorse”, and that he had been given the chance during the valuation process to argue Tinder was worth more.
While the trial was nominally about corporate valuation, the internal drama at IAC, which over the years had fostered such digital stars as Expedia and Vimeo, spilled out in public.
Emails shown during the trial revealed that Diller shared his excitement about Tinder with Rad, telling him in a 2014 email that his personal yacht crew was using the app. Rad had been later sacked as Tinder’s chief executive on two different occasions, as IAC’s management team questioned his maturity.
Match, whose shares have fallen 14 per cent in the past month, said it would pay the settlement from its cash on hand. Analysts at Susquehanna Financial Group had previously pegged a possible compromise at between $300m and $700m.
Representatives for Sean Rad declined to comment. Match Group declined to comment.