A class action lawsuit was filed against Bumble Inc. (BMBL) by Levi & Korsinsky on September 24, 2024. The plaintiffs (shareholders) alleged that they bought BMBL stock at artificially inflated prices between November 7, 2023 and August 7, 2024 (Class Period) and are now seeking compensation for their financial losses. Investors who bought Bumble stock during that period can click here to learn about joining the lawsuit.
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Bumble operates an online dating services platform. It operates several apps, including Bumble, Badoo, Bumble For Friends, and Official, aimed at different categories. The company’s claims about the relaunch of its Bumble app and future expectations are at the heart of the current complaint.
Bumble’s Misleading Claims
According to the lawsuit, Bumble and three of its current and/or former senior officers and/or directors (Individual Defendants) repeatedly made false and misleading public statements throughout the Class Period. Particularly, they are accused of omitting truthful information about the relaunch strategy for the Bumble app and ancillary issues from SEC filings and related material.
For instance, during an earnings call at the beginning of the Class Period, the company’s then-CEO discussed the benefits of the higher tier of the Bumble app, called Premium Plus. The CEO stated that Premium Plus would enhance the dating experience and improve the chances of a match. He added that the higher tier was being tested in several countries with good results.
Later at a 2023 UBS Global Technology Conference, the CFO stated that they had received positive initial responses from a lot of the company’s existing premium users. Also, the existing users were ready to pay a higher price for the higher quality services that would enable a shorter time to meet a match.
Finally, during Morgan Stanley’s Technology Media & Telecom Conference 2024, held in March 2024, the CEO mentioned that the company was adding more features to Premium+ to attract and retain users. This would increase the ARPPU (average revenue per paying user) for Bumble, with more users in the higher tier.
However, subsequent events (discussed below) revealed that Bumble allegedly misled investors about the potential benefits and demand for the revived Bumble app and the Premium Plus service.
Plaintiffs’ Arguments
The plaintiffs maintain that the Defendants deceived investors by lying and withholding critical information about the company’s business and prospects during the Class Period. Importantly, the Defendants are accused of misleading investors about the potential benefits of the Premium Plus service and the related increase in subscription revenues.
The information became clear on two events on February 27, 2024 and August 7, 2024. In February, when Bumble announced its Q4 FY23 results, it failed to meet analysts’ expectations. This was despite the tall claims made by the company about the launch of the Premium Plus subscription service in December 2022. Moreover, during the earnings call on the same day, management stated that the Premium Plus tier would be revamped as it did not have a clear “market fit.” Accordingly, the company even lowered its full-year Fiscal 2024 outlook. Bumble shares dropped 14.8% on the news.
Furthermore, in August, Bumble reported mixed Q2 FY24 results. During the earnings call, management surprised investors by stating that the app relaunch would not take place as per schedule. The company further cut its FY24 guidance significantly to reflect the poor launch and response to the Premium Plus tier, refocus on the “consumer ecosystem,” and revamp Bumble’s subscription tiers. Following the news, Bumble shares plunged 29.2%.
To conclude, Bumble allegedly made unrealistic claims about the potential of the Premium Plus subscription tier and the relaunch of the Bumble app. This led to overstated expectations for Fiscal 2024, which were eventually slashed. Year-to-date, BMBL stock has plunged 49.3%, causing massive damages to shareholder returns.
Interestingly, Bumble is due to release its Q3 FY24 results today, after the market closes. The Street expects Bumble to report diluted earnings per share of $0.20 on revenue of $271.83 million. It remains to be seen how Bumble fares today and whether or not the company revises its full-year guidance again.
