Bumble founder Whitney Wolfe Herd received a payout of $ 125 million after a complicated reorganization of the dating app’s parent company, according to a government document prior to its initial public offering.
Details of Ms Wolfe Herd’s financial arrangements with the company, including a $ 119 million loan to an entity it controls, are contained in an IPO prospectus published Friday.
The prospectus also showed that Bumble Holdings, which owns Bumble and the European-centric dating app Badoo, swung to a loss and grew at a slower pace after the reorganization led by private equity group Blackstone in 2019.
Bumble focuses on the experience of women in its dating apps and focuses on the growing market for online matchmaking services. The company logged 42.1 million active users in Badoo and its namesake app at the end of September, of which about 2.4 million users paid.
But the company’s growth has slowed since Blackstone agreed to buy a majority stake in 2019 and installed Ms Wolfe Herd as CEO, following allegations of a toxic work environment under former chief Andrey Andreev.
Mr. Andreev left the company, formerly known as MagicLab, and sold its stake as part of the deal, Blackstone said at the time. The investment valued Bumble’s parent company at about $ 3 billion.
According to the documentation, Wolfe Herd received a cash payment of $ 125 million as a result of the Blackstone-led agreement. Bumble also lent $ 119 million to an entity controlled by Ms Wolfe Herd. She paid off the rest of the loan this month.
Corporate governance experts usually warn against such transactions, which can raise questions about conflicts of interest. During its bid for public offering in 2019, WeWork showed a setback for transactions of similar parties.
Blackstone, venture capital group Accel, and Ms Wolfe Herd are expected to retain control of Bumble after the IPO.
In a process common to private equity firms, Bumble will also be structured as a cooperative partnership corporation that provides tax benefits to insiders. New shareholders will buy shares in a holding company, Bumble Inc, with a controlling interest in Bumble Holdings.
The IPO submission is emerging in a strong market for new US listings, after shares in other technology companies such as Airbnb and DoorDash rose from their IPO prices.
The presentation will increase the rivalry between Bumble and the dominant player in dating apps, Match Group, which owns Tinder, OKCupid and its namesake Match.com. The two companies were recently embroiled in a legal battle over allegations of patent infringement and theft of trade secrets, before settling all lawsuits last year.
Bumble is also facing increasing competition in the matchmaking industry as the social media group Facebook launches its own dating service to its 2.7 billion users.
Bumble reported net losses of $ 117 million in the first nine months of last year, a reversal of positive earnings of $ 69 million during the same period in 2019, but a figure that the company said was affected by transaction costs.
Growth slowed last year. In the first nine months of 2020, Bumble reported revenue of $ 417 million, an increase of 14.9 percent over the same period in 2019, but slower than the 35.8 percent revenue growth it reported from 2018 to 2019 .
Bumble reported two financial divisions in 2020 to reflect a change in corporate structure following the Blackorgan-led reorganization.
The company said the stock market proceeds are mainly used to pay off debt and buy back shares from private shareholders. Goldman Sachs and Citigroup serve as principal underwriters on the offer.