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Thoughts on Grindr
We're in the middle of the online dating theme for our Not So Deep Dive episodes, and last week we looked at Grindr $GRND. Grindr is the largest online dating platform focused on the LGBTQ community. Here are my scattered thoughts:

Grindr has clearly found product market fit. It was early to the mobile dating space and the platform has stuck. Now at roughly 12 million monthly active users, Grindr is clearly in the zeitgeist. It's a product with tremendous brand awareness which has allowed them to scale through their network effect requiring basically zero marketing spend. Obviously, that lends itself to pretty solid economics (~40% EBITDA margins).

My only real hiccup here is the lack of focus on shareholders. The company went public a couple of months ago via a SPAC and treated it simply as a liquidation event. In other words, the company received no cash from the SPAC, it only gave insiders a way to sell. Additionally, management appeared intentionally misleading when pressed about tough issues. During an interview on CNBC the day of their public listing, the CEO was asked how many shares outstanding the company actually had (the prospectus made it extremely difficult to tell), and he said he didn't know exactly but that it was more than 120 million. I emailed their investor relations and the answer was 173.5 million. So ya, a little misleading for anyone who tuned in that day. They also run at ~4x net debt to adj. EBITDA, which is ok given their current cash flow but it's all variable rate debt with an effective interest rate north of 10%. If rates continue to rise that'll be a whole lot of interest expense, making the Adj. EBITDA figure they cite more useless than it already is. And then on top of everything else, it trades at an EV to free cash flow of 33x. So not cheap.

In summary, Grindr's got a great product. Since it's so well known, they require very little spend to grow which makes for great economics. If the business gets a few years of operating as a public company under their belt, this is certainly something I could own down the road. But definitely not today, and certainly not at this price.

Here's our full episode for anyone who's interested: https://open.spotify.com/episode/5BYO0eJCnjAzQAdbS7AktQ?si=72a70532ebbc42f7
Spotify
Grindr (Ticker: GRND) Not So Deep Dive
Listen to this episode from Chit Chat Stocks on Spotify. Grindr Inc. (GRND) operates the popular dating app for LGBTQ+ individuals, and has experienced a surge in user engagement amid the pandemic, but the company faces stiff competition and growing concerns over data privacy and security in a highly competitive and crowded market. At the end of the month, we will publish an Arch Capital episode that will cover the company: Match Group. Listen closely as Brett and Ryan go through the history, financials, and future prospects of Grindr. Enjoy the show! ****************************** This episode is sponsored by Stratosphere.io, a web-based terminal for financial data, KPIs, and more. Try it out for FREE or use code “CCM” for 15% off any paid plan. Sign up here: https://www.stratosphere.io/ ****************************** Subscribe to our Substack to receive free show notes and charts that go along with every episode: https://chitchatmoney.substack.com/ Want updates on future shows and projects? Follow us on Twitter: https://twitter.com/chitchatmoney Contact us: chitchatmoneypodcast@gmail.com Timestamps Company Background | (3:00) Industry | (12:40) Management & Ownership | (15:58) Earnings | (20:51) Balance Sheet | (24:46) Valuation | (27:50) Our Analysis | (28:55) Disclosure: Chit Chat Money hosts and guests are not financial advisors, and nothing they say on this show is formal advice or a recommendation. Brett Schafer and Ryan Henderson are general partners and portfolio managers at Arch Capital. Arch Capital and its partners may hold securities discussed on this show.

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