A recent independent valuation of Tinder has placed the popular dating app's value at roughly $10 billion, an astounding increase from a $3 billion valuation less than two years ago that has potential ramifications for an explosive lawsuit against the company.

According to people familiar with the matter, the valuation commissioned by parent company Match Group reveals a spike in value that cements Tinder as the crown jewel in its dating app empire, which also includes apps like Hinge and OkCupid.

The new valuation of at least $10 billion is also highly relevant to a multi-billion dollar lawsuit between Match Group ($MTCH) and a group of early Tinder employees.

In August 2018, 10 former Tinder executives, including ex-CEO Sean Rad and two other cofounders, sued Match Group and its holding company IAC ($IAC) for roughly $2 billion they claim to be owed in unpaid Tinder stock. The details of the lawsuit are complicated, but the gist is that IAC allegedly “cooked the books” to deflate the previous valuation of Tinder in order to save itself from paying more money to the early executives for their stock.

Match Group contests that the lawsuit is meritless. The company has said in past statements that no parties involved in the 2017 valuation of $3 billion foresaw just how explosive Tinder’s business, which accounted for nearly 50 percent of Match Group’s revenue in 2018, would become.

Since Tinder’s last valuation in 2017, IAC’s stock price has grown more than 95 percent while Match Group’s stock has surged nearly 200 percent. IAC and Match have argued that the early Tinder executives are suing because they want to capture the profits they missed out on by leaving the company.

Why Match Group, a publicly traded company, would go through the trouble of hiring outside banks to give Tinder, one of its private subsidiaries, its own valuation has to do with how Match Group compensates Tinder employees.

Shortly after Tinder’s last $3 billion valuation was completed by outside banks in July 2017, Tinder employees were given performance-based stock packages to be awarded based on future valuations of the business. Such stock packages are common in the tech industry and are meant to give employees an extra incentive — beyond their salaries — to help a business meet future goals.

Match Group agreed in 2017 to pay out 100 percent of the performance stock awards if Tinder’s next valuation reached at least $10 billion, Cheddar has learned. Last week, Tinder employees were informed that they are getting their full performance stock awards upon the completion of Tinder’s new valuation. The details of the performance-based stock plans haven’t been previously reported.

Match Group’s VP of Communications, Justine Sacco, told Cheddar on Wednesday that the company doesn’t “comment on internal matters,” but “we can say that Tinder’s performance over the last 12-18 months has exceeded everyone’s expectations.”

After this story was published on Wednesday, the lead attorney for the plaintiffs in the lawsuit against Match Group, Orin Snyder, sent Cheddar the following statement:

“This report provides further evidence of what we’ve been saying all along — that Match schemed to cheat Tinder’s founders and employees out of billions of dollars.”

Understanding Tinder’s new valuation, which signals how the app would be valued if it was publicly traded as its own company outside of Match Group, requires some perspective.

As of Wednesday, Match Group has a public market valuation of roughly $15.3 billion. The dating app conglomerate made $1.7 billion in total revenue for 2018, $805 million of which it publicly attributed to Tinder. Tinder has consistently been the top grossing app in Apple’s App Store after introducing a subscription product called Tinder Gold in 2017, which allows users to pay for things like the ability to see who has swiped right on their profile.

Match Group itself is owned by IAC, a publicly-traded conglomerate of internet brands that includes the likes of Vimeo, Angie's List, and DotDash. IAC’s public market value is nearly $18 billion.

So at $10 billion, Tinder alone represents roughly 60 percent of Match Group’s current valuation. That makes it the most valuable part of not only Match Group, but IAC’s stable of brands by a wide margin.

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