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Experimental Format. We might change the format over time based on best workflows for us.

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Decision

MM: I increased my position by 100%.

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Briefing

After Q3 earnings we continued to research Whitney Wolfe Herd and her executive team and had positive findings. In addition the strong founder of main competitor Hinge just announced that he would leave Hinge. Given that we think the stock is cheap we are considering the position by 50% to 100%.

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Questions

• Which events would cause more downside pressure to the stock from here? </aside>

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Aron:

Arguments for increasing the position

1. It’s led by its founder who’s obsessed with the company’s mission and now has increasing control of the company: ‣ | ‣
2. Departure of Hinge’s CEO Justin McLeod increases execution risk at Hinge, meaning there could be less competition for Bumble longterm. Competition from Hinge has been one of the highest risks: https://forum.investmentwiki.org/t/match-group-management/509/8?u=aron | Risk of woman who want intentional dating migrate to Hinge in key markets
3. Our increasing confidence on the new hires, particularly the CMO, CTO and CPO: ‣
4. Complaints from women against Bumble this year has been limited, suggesting that user perception among women is still stable. Similarly, search interests for Bumble appear stable:
5. My growing confidence that Bumble should be able to finance its upcoming debt liability of $600 million in 2027 (to be investigated further). Bumble has so many non-cash payments (i.e. impairments, stock-based compensation) which provide tailwind for positive operating cash flow in the near-term even in a worst case scenario? Bumble Valuation Model (Google Sheets) | Bumble Cash Flow Model (Google Sheets)
6. As the platform’s quality grows, pricing grows limiting revenue downside even if payers are declining
7. Very cheap valuation limits downside pressure on share price. Downside pressure may not happen until the next earnings when we get insights on the company’s execution.

Arguments against increasing position

1. High risk that CEO Wolf Herd may experienced another burnout, accelerated by the fact that she’s expecting a baby and the risk that she may not be fully healed from past psychological trauma in her past stint at Bumble: ‣ ← MM: Mainly based on that she said he had an burnout before or any other indication?
2. Payers will likely continue declining in the near-term as the company launches safety features and initiatives to improve the quality of the platform: Bumble Valuation Model (Google Sheets) ← MM:Model to be discussed
3. Having a completely new team means high risk of turnover if they feel culture is not fitting, which could affect execution i.e. CMO has been disinterested in working for another founder: ‣
4. Concerns on Wolf Herd’s ability to lead the current Bumble. In the past, luck (need for a women dating app) and political connection somehow helped her. The current problem is swipe fatigue, fear of being ignored, and safety: ‣

Conclusions

• My confidence level (30%→60%) is growing and I don’t expect a lot of downside risk going forward. Therefore, I recommend increasing the position. I am not sure by how much, but I feel like increasing it by 50% is a lot given the current confidence level. </aside>

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MM

Arguments for reducing/against increasing the position

• Risk that founder cannot manage company at this size, she is too positive, too overambitious, too laid back etc. ‣
• Risk that new team is not executing as it should given how new it is ‣
• Risk that trends away from Apps is not getting better but worse.

Arguments against reducing/for increasing position

• Very cheap valuation, trust in mission driven founder, longterm AI acceleration
• Dating is universal need. There will always be dating.
• Multi App landscape. This reduces risk of Hinge somewhat Dating is a multi app category. This means users use multiple apps at once. This reduces the risk of hinge somewhat.
• Flexibility to reduce costs and size of company if needed due to digital business
• Price pressure from here more towards the upside? - It’s already at the button. Limited room to keep falling?
• We currently have capacity to focus mainly on Bumble in the next weeks to feel more comfortable with the decision or reverse it? ← Discuss!
• Tiny argument: Reviews on Glassdoor improving a bit? I don’t have full access but did not find anything very concerning immediately. ‣ ←discuss

Conclusions

• Very likely going to increase by at least 50%. </aside>