The Match Group Is Getting No Love

The US equity markets continue to make new all-time highs…almost every day…with the exceptions of the Russell 2000 Index. The Russell 2000 index represents the largest 2000 small cap public companies in the US.

Rising interest rates hurt smaller companies the most because they have a higher debt to earnings ratio and lower free cash flow relative to much larger companies. However, that’s not the case. Rates continue to get cut, which should help the all the companies listed within the Russell 2000 index.

What what if you are the largest short on the Russell 2000 index? Well that's the situation Match Group finds itself.

Match Group, Inc. provides dating products worldwide. It operates a portfolio of brands, including Tinder, Match, PlentyOfFish, Meetic, OkCupid, OurTime, Pairs, and Hinge, as well as other brands. Match Group, Inc. offers its dating products through its applications and Websites in approximately 40 languages.

Online-dating company Match Group Inc. MTCH, -2.36% isn’t getting many investor love letters, with nearly 59% of its float sold short, topping the list. Shares have had a bumpy ride lately, declining 4.4% this month and nearly 19% over the last three months, but the stock has still run up a return of more than 60% in 2019.

The Match Group Inc.’s proud and joy is Tinder. Tinder is a location-based social search mobile app and Web application most often used as a dating service, that allows users to use a swiping motion to like or dislike other users, and allows users to chat if both parties like each other

Back in early November, during the third quarter earnings announcement, Tinder added 437,000 paying Tinder subscribers in its latest quarter and is on pace for an annual increase of about 1.6 million paying users. This compares 917,000, 1.5 million, and 1.2 million in 2016, 2017, and 2018, respectively. Nevertheless, the forward financial guidance came up short of expectations.

If that's not bad enough, the Federal Trade Commission (FTC) is suing Match Group, claiming the company unfairly exposed consumers to the risk of fraud and engaged in other allegedly deceptive and unfair practices. The suit claims that the company was sending these notifications to entice unsubscribed users when Match knew the messages were coming from accounts already flagged as potentially fraudulent.

So what would happen to Match Group if the Russell 2000 turns for the worst at current levels?

Yes, the Match Group should decline as well as the chart suggest price will decline to at least the $60 level.

This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.