Andrew Bary 

Investors swiped left on Grindr, with an overwhelming number choosing to not participate in the deal.

In a filing Tuesday, Tiga Acquisition (ticker: TINV), a special purpose acquisition company, disclosed that investors holding 98.2% of its shares opted to redeem their stock for an estimated $10.50 a share rather than participate in a merger with Grindr, the leading LGBTQ+ dating site. Holders of some 27.1 million shares opted to redeem for cash held in a trust by Tiga, while holders of about 500,000 shares decided to participate in the deal due to close on Friday.

The very high redemption vote could reflect the lofty valuation of Grindr relative to other leading public dating companies, notably Match ( MTCH) and Bumble ( BMBL).

Despite the high redemption, Tiga shares had surged 28% to $13.04 in Wednesday morning trading on volume of about 425,000 shares. The gain could reflect the thin current float in the stock, given that only about 500,000 shares now are available to trade. It is common for SPAC stocks to be volatile in the immediate aftermath of a vote if there is a high redemption rate that limits the float.

"These low-float stocks can go from $10 to $30 to $3 a share," says Julian Klymochko, the chief executive of Accelerate Financial Technologies, which invests in the SPAC market.

Indeed, shares were trading 10% lower to $9.14 in afternoon trading. Like most SPACs, Tiga went public at $10 a share.

It may take time for stock issued to the owners of Grindr and other shares to begin to trade, increasing the float. The company will get $100 million from a forward equity sale of 10 million shares being purchased by an investor group including key executives. Barron's estimates the total share count is around 173 million shares, which values Grindr at about $2.3 billion.

Klymochko says the redemption rate for the Grindr was unusually high for a SPAC when many SPACs are seeing lofty redemption rates of above 90%

Grindr looks richly priced relative to revenue and cash flow based on its current market value of $2.3 billion. The company had revenue of $90 million in the first half of 2022, up 43% from the same period in 2021. Trailing 12-month revenue was $177 million in the year ended June 30. Third-quarter results aren't out yet.

Grindr is valued at 13 times trailing 12-month revenue, more than double that of both Match and Bumble at about six times. Grindr generated adjusted earnings before interest, taxes, depreciation, and amortization of $42 million in the first half of 2022, up from $33 million in the same period of 2021. Annualize the first half results and Grindr is valued at around 27 times Ebitda, or earnings before interest, taxes, depreciation, and amortization, versus about 15 times for Match.

The first-half Grindr adjusted Ebitda includes an add-back of $13.7 million of stock compensation, which is properly recorded as an expense in generally accepted accounting principles, or GAAP. Include stock compensation as an expense and Grindr's first-half Ebitda would have been under $30 million, below the year-earlier total.

Based on an updated investor presentation on its website, Grindr sees a huge opportunity as it has transitioned from a casual dating site for gay men more than a decade ago to one serving the global LBGTQ+ community. It says that 564 million people around the world, or 7% of the population of about 8 billion, identify as LBGTQ+ and that total is growing each year.

Grindr so dominates the space and has such high name recognition that it spends just 1% of revenue on marketing, against about 28% for Bumble.

Grindr's challenge is that only 6% of its monthly average users of 11 million are paying customers, against 9% at Bumble and 18% at Tinder, which is owned by Match.

The company has developed premium services such as ones that lack ads and provide a better user experience to generate more paying customers.

Tiga announced its deal to merge with Grindr in May. Since then, shares of industry leader Match have fallen over 30% to $50.56 amid concerns about a slowdown in the online dating market. The SPAC will change its name to Grindr when the deal closes and trade under the ticker symbol GRND.

Write to Andrew Bary at andrew.bary@barrons.com

(END) Dow Jones Newswires

November 16, 2022 12:30 ET (17:30 GMT)

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