Author Topic: IACI - IAC/InterActiveCorp  (Read 12930 times)

ni-co

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Re: IACI - IAC/InterActiveCorp - Tinder
« Reply #20 on: November 19, 2015, 03:05:09 AM »
Isn't the reason it's not priced for growth because Tinder is cannibalizing the other sites? You can't just look at Tinder and ignore that Tinder doesn't monetize as well as Match. Tinder is great except that the company is called Match.

This assumes that the established dating sites and Tinder cater to the same market which is quite obviously not the case. Naturally, there is some overlap but if analysts really took a step back used their brains and thought whether all the people using the other sites would be just fine switching to Tinder they would soon discover that this theory is mostly nonsense. Tinder's market is far bigger to begin with and its user base is much younger. I'd bet that most of them wouldn't even have thought of online dating before Tinder became a thing.

I've read several times that high churn rates were the problem of dating sites. My question here is: If they were such a problem wouldn't free cash flow be impacted by it? Well, it is not and what that tells me is that customer acquisition costs are still far cheaper than the money you earn from the new/retained customers. We are not talking about a GRPN problem here. There is plenty of FCF.

On a larger scale, people really seem to overdo it with disruption theory. They are so afraid of disruption that they mostly ignore how cheap a price they pay for companies with very good business models and large cash flows.

Here, you can buy the (seeming) disruptor in a package with the incumbents, together yielding 8.5% free cash flow (4% earnings) with 15% top and 8% annual bottom line growth over the last 4 years and Mr Market's reaction is: meh. I'd rather own MTCH than buy the S&P 500 at a highly levered 4.5% earnings yield or 30y treasuries at 3%.
« Last Edit: November 19, 2015, 03:53:23 AM by ni-co »


ZenaidaMacroura

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Re: IACI - IAC/InterActiveCorp - Tinder
« Reply #21 on: November 19, 2015, 04:08:29 AM »
The Match Group (MTCH) IPO prospectus is out. Something's gotta give. This could be a real special situation opportunity, guys:

https://www.sec.gov/Archives/edgar/data/1575189/000104746915007908/a2226226zs-1.htm

Looks to me, as if MTCH will be worth at the very least $50 per IACI share. Possibly a lot more. Just some food for thought: If you want to get crazy (which Barry Diller tells you not to do) and you assign to it Facebook's EV/EBITDA (ttm) of ~40x it could be worth up to $120 per share, if you use FB's FCF/Market Cap multiple of ~75x, it could be $210 per share. In any case, online dating seems to be a really good FCF business. I really like the business model. It's cash flow oriented and large scale at the same time. Diller, by the way, is demonstratively restrained about Tinder (at the same time he's talking about hundreds of thousands of subscribers).

My biggest problem is how to value the rest of IACI. Should be somewhere between $30 and $70.

In any case, this remains a very good risk/reward bet for me. Momentarily, the best idea I have.

Nobody is talking about this. Makes me wonder why. "Tinder IPO" should be a really hot media topic. Maybe it's a bit too early for that. But I would be very surprised if this IPO wouldn't be hyped by CNBC & Co.
I'm a bit behind on this one but after they IPO do they have any longterm plan for the portion still held by IACI?  To be spun out etc?

ratiman

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Re: IACI - IAC/InterActiveCorp - Tinder
« Reply #22 on: November 19, 2015, 04:21:34 AM »
Isn't the reason it's not priced for growth because Tinder is cannibalizing the other sites? You can't just look at Tinder and ignore that Tinder doesn't monetize as well as Match. Tinder is great except that the company is called Match.

This assumes that the established dating sites and Tinder cater to the same market which is quite obviously not the case. Naturally, there is some overlap but if analysts really took a step back used their brains and thought whether all the people using the other sites would be just fine switching to Tinder they would soon discover that this theory is mostly nonsense. Tinder's market is far bigger to begin with and its user base is much younger. I'd bet that most of them wouldn't even have thought of online dating before Tinder became a thing.

I've read several times that high churn rates were the problem of dating sites. My question here is: If they were such a problem wouldn't free cash flow be impacted by it? Well, it is not and what that tells me is that customer acquisition costs are still far cheaper than the money you earn from the new/retained customers. We are not talking about a GRPN problem here. There is plenty of FCF.

On a larger scale, people really seem to overdo it with disruption theory. They are so afraid of disruption that they mostly ignore how cheap a price they pay for companies with very good business models and large cash flows.

Here, you can buy the (seeming) disruptor in a package with the incumbents, together yielding 8.5% free cash flow (4% earnings) with 15% top and 8% annual bottom line growth over the last 4 years and Mr Market's reaction is: meh. I'd rather own MTCH than buy the S&P 500 at a highly levered 4.5% earnings yield or 30y treasuries at 3%.

You're right, it does look like a good business. The real genius of the business is that it spends only around 6% on r&d, whereas most tech companies are in the 10-20% range (look at Linkedin for completely out of control tech spending - and Match and Linkedin are the same business!) And Tinder could have a lot of interesting ways to monetize with advertizing and so on. It's just not that clear right now, and the customers actually paying are aging out of the dating market, as you point out. On the other hand, the land rush days in dating are probably over - I wouldn't want to compete with Tinder or Match at this point.

ni-co

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Re: IACI - IAC/InterActiveCorp - Tinder
« Reply #23 on: November 19, 2015, 04:41:41 AM »
I'm a bit behind on this one but after they IPO do they have any longterm plan for the portion still held by IACI?  To be spun out etc?

Greenblatt once said in one of his classes that when they only IPO a small part of the company the goal is almost always to achieve a higher price for the whole thing. Spinning the 85% off would be far more tax efficient, but in the end it depends on IACI's cash needs.

What they should have done from a tax perspective is the Malone model: First create a MTCH tracking stock - that's tax free and you get almost all the advantages of an IPO (except the cash, obviously) and then, later, do a full spin-off.
« Last Edit: November 19, 2015, 10:09:18 AM by ni-co »


ni-co

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Re: IACI - IAC/InterActiveCorp - Tinder
« Reply #25 on: November 20, 2015, 07:44:27 AM »
IACI sum of the parts is getting more and more interesting. Funny that the MTCH gain seemingly doesn't translate to IACI, even though its MTCH ownership is no worth ~$40 per IACI share.

ZenaidaMacroura

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Re: IACI - IAC/InterActiveCorp - Tinder
« Reply #26 on: February 04, 2016, 07:55:02 PM »
IACI sum of the parts is getting more and more interesting. Funny that the MTCH gain seemingly doesn't translate to IACI, even though its MTCH ownership is no worth ~$40 per IACI share.

Any thoughts on IACI here nico?

ni-co

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Re: IACI - IAC/InterActiveCorp - Tinder
« Reply #27 on: February 05, 2016, 01:35:45 AM »
IACI sum of the parts is getting more and more interesting. Funny that the MTCH gain seemingly doesn't translate to IACI, even though its MTCH ownership is no worth ~$40 per IACI share.

Any thoughts on IACI here nico?

Well, it's cheap.

wachtwoord

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Re: IACI - IAC/InterActiveCorp - Tinder
« Reply #28 on: February 05, 2016, 03:20:26 AM »
They have quite a bit of debt. Do you have information about their capability of servicing that?
"Beware of he who would deny you access to information, for in his heart he dreams himself your master"

ni-co

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Re: IACI - IAC/InterActiveCorp - Tinder
« Reply #29 on: February 05, 2016, 04:02:43 AM »
Who has quite a bit of debt? IAC? Have you netted out the cash?