Power Sheet – November 19, 2015

Investors contemplating a long-term relationship, or just a fling, with Match Group faced a quandary this morning. That’s when the company that owns Tinder, OkCupid, and more than 40 other dating sites worldwide became available on the financial hookup platform otherwise known as Nasdaq through an IPO. Actually there were two quandaries. One was the usual question of whether shares were worth their offering price of $12. The other concerned leadership.

The great consultant Ram Charan has long maintained that a board of directors’ most important job is choosing the right CEO, and the CEO of Match Group is Sam Yagan – but you’d never know it from yesterday’s publicity about the company. Much of it focused on an interview with Tinder chief Sean Rad in London’s Evening Standard. While Tinder is only one of Match’s many brands, it’s the most famous and possibly the most important. BTIG analyst Brandon Ross wrote in a note yesterday that valuing Tinder is difficult based on data released so far, but it could eventually be worth all the rest of the company combined – or could even be worth Match Group’s entire market valuation of $4.2 billion (including debt). So if you’re a potential investor evaluating the company’s leadership, how much of your decision is based on Yagan and how much on Rad?

They appear to be radically different leaders. In the Evening Standard interview, Rad, 29, comes across as good-hearted, immature, far from intellectual, socially awkward, and unpredictable. I’ve never heard of another CEO telling an interviewer that a “really, really famous” supermodel was “begging” him for sex, but he said no because she wasn’t “an intellectual challenge.” For all his virtues, Rad is probably not a guy you’d want running a publicly traded corporation of which you were an owner.

Yagan, by extreme contrast, is a 38-year-old highly successful serial entrepreneur. In 1999 he founded SparkNotes, still the leader in study guides, which he sold, then a file-sharing network called eDonkey, then OkCupid in 2003. Time named him one of the world’s 100 most influential people, and here at Coins2Day we put him on our 40 Under 40 list.

Rad dropped out of USC after two years – a badge of honor among tech entrepreneurs, but another huge contrast with Yagan, who has a degree in applied math and economics from Harvard and an MBA from Stanford, where he was a Siebel Scholar, an Arjay Miller Scholar, and the Henry Ford Scholar, which is what they call the class valedictorian. He has been Match Group’s CEO for the past two years when it was wholly owned by Barry Diller’s IAC. In short, he’s a guy you can quite easily see as CEO of a publicly traded company.

Which leader is more important for investors? Despite Tinder’s significance in Match Group, I’d say Yagan deserves a much heavier weighting in investor judgments; unsurprisingly, Diller and his advisers seem to have arranged things wisely. The larger point is that judging leadership is at least as important as judging finances in an investing decision, especially in a business like Match that is inherently almost impossible to value on conventional measures.

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