Grindr Stock: GRND Price Triples Post SPAC Merger
November 22 2022 - 5:08AM
Finscreener.org
Shares of dating platform
Grindr gained 213%
on November 18 after the company went public on the bourses via a
SPAC (special purpose acquisition company) merger. Grindr is an
LGBTQ dating app that began trading on the NYSE at a price of
$16.90 per share. It touched a record high of $71.51 and ended at
$36.50 when markets closed.
The ticker for Grindr is GRND and
company CEO George Arison stated, “It’s a pretty incredible thing
that the company whose primary user base is gay and bisexual men,
built by and for the LGBTQ population, with an employee base that
is heavy in that cohort of the population as well, is now going
public. It’s not something that would not have happened 20 years
ago, probably wouldn’t have happened even 10 years ago.”
The excitement surrounding the
company came as a surprise, as investor sentiment has remained
quite bearish in 2022. For instance, dating applications such
as Bumble (NASDAQ: BMBL)
and Match (NASDAQ:
MTCH) are down 32% and
65%, respectively, year to date.
Arison emphasized Grindr will
differentiate itself from peers as it aims to build a
community-based social network for LGBTQs.
Let’s look at Grindr’s key
metrics and if investors should be excited about the stock right
now.
Grindr stock price and revenue trends
The stock price of a company is
directly tied to its revenue and earnings. Grindr has increased
sales from $66 million in 2017 to $147 million in 2021.
Comparatively, its adjusted EBITDA has risen from $11 million to
$77 million in this period. In the first six months of 2022,
revenue rose 42% to $90 million, while a challenging
macro-environment meant its EBITDA could expand by “just” 26% to
$42 million.
With 11 million monthly active
users and 765,000 paying users, Grindr is available in more than
190 countries. The average daily time spent on the app is 61
minutes, while 80% of its user base is below the age of
35.
The company expects its total
addressable market to touch a staggering $14 trillion by 2026,
which encompasses verticals such as travel, health & wellness,
and entertainment for the LGBTQ community.
We can see that Grindr is a
highly profitable business and is quite early in its monetization
journey. With attractive user demographics and a rapidly expanding
market, it has established itself as a market leader in the LGBTQ
space.
In the first half of 2022, Grindr
spent just 1% of its revenue on marketing, allowing it to end the
period with an EBITDA margin of 46%.
It will soon be expanding product
features on the app to include premium add-ons, subscription-based
pricing optimization, and product adjacencies which should expand
its base of paid subscribers. Right now, paid user penetration is
quite low at 6%. Comparatively, Bumble and Tinder have higher
penetration rates of 9% and 18%, respectively.
Is GRND stock a buy or a sell?
In its press release, Grindr
explained the combined entity would have a post-transaction
enterprise value of $2.1 billion. The cash proceeds it raised
consist of $284 million of cash in trust and another $100 million
in cash equity from a forward purchase agreement.
The net proceeds of the
transaction will be used to satisfy debt obligations, and fund
planned growth initiatives.
According to data from Trading
View, the company is valued at a market cap of $1.1 billion. So, if
Grindr ends the year with sales of $180 million and adjusted EBITDA
of $84 million, GRND stock is priced at 6.1x forward sales and 13x
forward EBITDA, which is not too steep for a profitable growth
stock.
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