Why Match Group Stock Lost 16% in September

A Federal Trade Commission lawsuit put the brakes on the online dating website operator’s 2019 rally.

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What happened

Match Group (NASDAQ: MTCH) shares lost ground last month, shedding 16% even as the S&P 500 rose by 2%, according to S&P Global Market Intelligence. That decline only put a mild dent in longer-term investors’ gains, however, given that the stock still ended September up by more than 70% for 2019 overall.

So what

Most of the decline came late in the month after the Federal Trade Commission announced a lawsuit against the company. Among other things, the FTC alleges the company has been “using fake love interest ads to trick consumers into paying for a Match.com subscription.” In essence, it has allegedly been tempting them with the prospect of exchanging messages with a genuine romantic prospect, when the contacts were coming from accounts already flagged as likely fraudulent.

The FTC doesn’t allege that Match Group was behind the actual romance scams, but rather that it used known scammers’ messages to entice free trial users to sign up for the paid service. Match.com users can’t respond to messages they’ve been sent unless they subscribe.

Now what

It’s unclear how large a financial hit the tech stock would take if it were to lose this lawsuit. The more important question is to what extent Match Group’s subscription growth has been coming from efforts that result in a poor user experience, which would open it to challenges from Facebook (NASDAQ: FB) and others looking to take market share in the online dating business.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Demitrios Kalogeropoulos owns shares of Facebook. The Motley Fool owns shares of and recommends Facebook and Match Group. The Motley Fool has a disclosure policy.

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