Will Bumble's IPO deliver a sweet Valentine?

Bumble is the one doing the courting around Valentine’s Day this year - as it aims for a valuation of more than $7 billion in its much-awaited stock market debut.

The popular dating app is stepping out from the shadow of the Match group, says Nick Einhorn - a senior analyst at Renaissance Capital.

"There's really one large public dating company, which is Match. They own Tinder as well as a lot of smaller brands, and that stock has done very well recently, and trades at a fairly high valuation. And so I think there's definitely appetite among investors for dating companies, another dating app of scale like Bumble.”

Bumble was founded in 2014 by Whitney Wolfe Herd, one of the founders of rival app Tinder, which she left earlier that year.

Based in Austin, Texas, it boasts a line-up of celebrity investors, including the likes of tennis legend Serena Williams and actress Priyanka Chopra.

The app is immensely popular among millennials and has grown rapidly worldwide over the past few years.

It clocked 42 million monthly active users as of the third quarter of 2020.

But is now the right time to invest with lockdowns crippling the dating scene?

According to Einhorn, the app’s design presents a unique enough proposition - designed around letting women make the first move.

"You know, most of their revenue comes from their flagship app, Bumble itself, and that app is fairly uniquely differentiated within the dating landscape. It's focused on women and their experience and trying to avoid some of the toxicity that's associated with other dating apps, and you know, promote a more equitable gender landscape. And, so, I think that kind of unique positioning will definitely appeal to some investors as well."

Bumble is certainly hoping to reel in the big bucks.

The Blackstone-backed company plans to raise up to $1.8 billion.

But there are some caveats.

"The biggest negative, I think, about the IPO is just that a lot of the proceeds will be going to Blackstone. I think they're going to be selling about $1.3 billion worth of shares back to the company as part of the offering. And there also were some distributions, as well as a tax receivable agreement that will provide payouts to both Blackstone and the founder, Whitney Wolfe Herd, in the future. So, I think that's kind of the biggest negative for IPO investors is, generally speaking, you prefer not to see the pre-IPO investors taking a lot of cash out of the company when it's going public. But I don't think that'll be enough of the sticking points to prevent the deal from doing well."