Square, Tinder's parent defy valuation concerns with strong market debut

Mobile payments startup Square Inc and Match Group, the owner of dating site Match.com and dating app Tinder defied odds over valuations concerns to make a strong debut on the New York Stock Exchange on Thursday.

Although, it is still early days to pronounce a big success for these two ventures as many firms have seen their valuations collapse eventually post listing, this sends a positive signal for tech startups in general. It also provides a temporary validation by a larger pool of investors about the business models behind such firms.

Concerns over inflated tech valuations have kept startups worried about investor reception to initial public offers (IPO), but the duos' strong openings indicate that all is not lost if the the shares are priced right.

It also has implications for firms like Matrimony.com Pvt Ltd. In August, the firm behind a string of Indian matrimony-related consumer internet properties including its flagship matrimonial site BharatMatrimony.com and relationship app Matchify, had filed its draft red herring prospectus (DRHP) with securities market regulator Sebi to float its IPO.

BharatMatrimony's area of operation is somewhat similar to that of dating apps such as Tinder, Match and OkCupid.

The shares of Match Group opened at $13.50 after pricing at $12 and closed 23 per cent up at $14.74 on day 1.

Match had generated $883.3 million in revenue last year, up from $803.1 million in 2013. In the same period its adjusted EBITDA moved from $271.2 million to $273.4 million, while net profit grew from $126.6 million to $148.4 million.

Matrimony.com is a much smaller firm in comparison and is in losses. It posted revenue Rs 232 crore with EBITDA of Rs 17.8 crore and net loss of Rs 2.92 crore.

Match's positive reception may send some comfort level to investors looking to bet on Matrimony.com. The firm is yet to receive the approval to go ahead with an IPO, however.

Match had launched Tinder in 2012 and claims 26 million matches on Tinder each day all around the world. Tinder competes with India crafted dating startups TrulyMadly, Vee, Woo, Thrill and Singles Around Me.

Meanwhile, mobile payment startup co-founded by Twitter Inc CEO Jack Dorsey was an even bigger surprise. Shares of Square opened at $11.20 and closed 45 per cent up at $13.06 on debut after slashing its offer price to $9 a share, below the intended range of $11 to $13.

Square, co-founded in 2009 by Dorsey and Jim McKelvey, launched its first app and service in 2010. Its offerings include Square Register and Square Reader while it has also expanded into small business services such as Square Capital, a financing program, and Square Payroll.

Its strong market debut sends positive signal for Indian peers like mobile wallet and e-commerce venture Paytm, run by One97 Communications Ltd. Indeed, Paytm's parent had filed for an IPO five years ago but later decided to withdraw the proposed public issue as it did not find the investment sentiment buoyant enough back then.

Larger Indian tech startups have preferred to raise more private funding to raise cash.

Performance of e-commerce firm Infibeam and Matrimony.com that have filed papers to go public would be closely watched for others to join the bandwagon.

The positive reception for Square and Match puts a breather for tech unicorns globally.

A number of IPOs of Silicon Valley startups have performed poorly over the past year. Indeed, China's Alibaba saw its share price slide after a historic IPO and initial excitement on its growth and correspondingly valuation pop-up.

The latest IPOs indicate that the stock market may offer more juice for tech startups.