Shares of Grindr (GRND), the dating app designed for queer people, climbed as high as 22% on Friday afternoon, extending its recent rally. The boost was fueled by an offer from James Lu, chairman of Grindr’s board, and billionaire board member Raymond Zage, to take the social network private in an $18 per share deal.
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According to Grindr’s latest Schedule 13D filing with the U.S. securities regulator, Lu and Zage, along with the latter’s affiliated companies, have submitted a “preliminary and non-binding” proposal to the company’s board to buy out all existing shares they do not already own. Both investors together control more than 60% of the social network.
Earlier media reports have indicated that the take-private deal could value Grindr at about $3 billion. Lu and Zage had taken over Grindr in 2020 from its previous Chinese owners in a $608 million deal.
The social network, which prides itself on being “the global gayborhood in your pocket,” later went public in 2022 on the New York Stock Exchange at a $2.1 billion valuation. Grindr now boasts a user base of nearly 15 million people.
Is Grindr’s Buyout a Necessity or Opportunity?
Meanwhile, both board members disclosed in the U.S. Securities and Exchange Commission filing that they will fund the acquisition with a combination of equity and debt financing. The offer comes more than one week after Grindr’s board confirmed the proposed acquisition, reportedly at a $15 per share deal.
In response, Grindr established a special committee of independent directors to consider the incoming offer. GRND stock popped on the update, after earlier adding as much as 16% when the news first broke.
According to Semafor, Lu and Zage’s decision to buy out the company came after a lender reportedly dumped their GRND shares used as collateral for a loan, forcing both of them into “a precarious personal financial position.”
Grindr was first launched in 2009 by Israeli American tech entrepreneur Joel Simkhai. However, later in 2016, ownership changed hands to Chinese firm Kunlun Tech, which was later forced to give up the company due to the U.S. government’s concern about data privacy.
Is Grindr stock a buy?
Turning to Wall Street, Grindr’s shares currently have a Strong Buy consensus rating, according to TipRanks’ data. This is based on four Buys issued by analysts over the past three months.
Moreover, the average GRND price target of $22.75 indicates approximately 49% upswing potential from the current level. However, year-to-date, the shares have plunged more than 14%.
