The founders of the popular dating app
“When it came time to pay the men and women who had built this company what they were simply owed what they were contractually obligated to pay, the defendants in this case schemed to create a phony story about the future growth of Tinder so they wouldn’t have to pay,” Josh Dubin, an attorney for the Tinder founders, said Monday at the start of a state court trial.
The legal fight over compensation began with a 2018 lawsuit by Tinder co-founders
While Tinder’s “swipe right” and “swipe left” system to vet prospective dates made it one of the hottest mobile apps of the past decade, the suit revealed acrimony within the companies that helped fund its development. IAC and Match said Rad destroyed evidence and paid ex-workers to back his lawsuit. Rad accused them of covering up
The prospect of an “unpredictable” trial outcome creates risks for Match, which has agreed to pay IAC’s liability in the case, said
If Blatt, Diller and Rad testify as expected, “there is the potential for trial fireworks that could lead to negative headlines for IAC/MTCH and could cause them to strongly consider a settlement,” Claps wrote in a note to clients. That probably will lead to a settlement of $300 million to $700 million before the jury reaches a verdict, the analyst said.
“Leaving this to a jury is inevitably a bit of a roll of the dice” for Match, said
IAC and Match hired well-known trial lawyer
The plaintiffs, including other Tinder executives and early employees, say they were granted options in 2014 by IAC and Match that entitled them to more than 20% of the company. Because Tinder wasn’t publicly traded, IAC and Match were required to hire investment banks to estimate its value on four specific dates: May 2017, November 2018, May 2020 and May 2021.
According to the suit, IAC and Match engineered a lowball valuation of the company by providing false information to the banks, and then merged Tinder into Match hours after the first valuation in 2017, terminated the options agreements and cancelled the additional payment dates.
Tinder was “one of the most successful tech companies in the world” by July 2017 and had “literally taken the world by storm,” Dubin told jurors. But while Blatt told the public on a Match earnings call in November 2016 that Tinder was a “rocket ship,” when it came time to value the company, he sang a different tune, Dubin said.
The jury will see “stunning evidence of lies, deception, bullying and cheating to support this phony story” with bankers, that the “rocket ship was going to flat-line and crash and burn,” Dubin said.
Match declined to comment. In court filings, IAC and Match said the banks determined Tinder’s value based on information from both sides and that the plaintiffs reaped $700 million when they exercised their options, including $400 million for Rad. IAC and Match said the former Tinder executives are bitter because they cashed out too early.
The case is Rad v. IAC/InterActiveCorp, 654038/2018, Supreme Court of the State of New York (Manhattan).
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