How Tinder shot down Cupid

After a high-profile AIM listing in 2010, the online dating specialist Cupid has become a shell of its former self. Simon Neville reports on what went wrong

Dating is one of the industries transformed by the internet, but that doesn’t explain why Cupid sold a potentially lucrative part of its business (Alamy)

The dating industry, like pornography before it, is feeling the full force of online consumerism and is realising that customers no longer want to pay extra for so-called “premium” content.

One company which has crashed to Earth faster than a speeding love arrow is the AIM-listed, Edinburgh-based Cupid.

But rather than attempt to rebuild and recover from the decline in its fortunes, the bosses at Cupid have decided to call it a day and have sold the last of its dating businesses, including cupid.com and uniformdating.com, for just £3m.

Cupid had already sold its “casual dating” businesses – with sites including BeNaughty, Flirt and CheekyLovers – for a healthier £45.1m last year, although part of yesterday’s transaction will see £20m outstanding from that deal reduced to £12.5m instead.

Now, with no dating businesses left, Cupid plc becomes another shell investment company, plotting its next move.

All of this sent the shares tanking 25.5 per cent to 19p, as those shareholders still holding on stare at an uncertain future as part of Castle Street Investments, because even if they do vote against the unwinding of the business and the switch to essentially a shell company, the board have already said they will shut the dating business regardless.

Shareholders’ best hopes will be that a well-funded investment vehicle is waiting to get a place on the junior stock market AIM without going through the hassle of an IPO.

Alternatively, Cupid’s founder, Bill Dobbie, who is also the biggest shareholder, could use the £18m sitting in the company’s bank account to set forth on his next entrepreneurial digital adventure.

However, questions remain over how Cupid managed to go from a company worth £180m just a few years ago, to being worth no more than the cash in its bank account. It listed on the stock market only four years ago.

And what now for Mr Dobbie’s co-founder, the Ukrainian businessman Max Poltakov, and the remainder of what they once proudly boasted was the only listed online dating service in the UK?

And can a publicly traded company simply abandon its entire business proposition without repercussions?

First off, it is worth noting that the online dating sector appears to have changed beyond recognition, mainly thanks to apps such as Grindr and more recently Tinder. With these, users can quickly swipe through profiles of potential partners and be matched up instantly, no longer having to trawl through lengthy profiles like an HR director looking for a new recruit.

Cupid, however, fell quickly behind and by last year the wheels were starting to come off, as it hit a pre-tax loss of £7.4m followed by a £2.8m first-half loss in June. It said: “Through the course of the first half of 2014 it became clear that the pace of change in the industry was increasing; innovation with mobile and intuitive apps is accelerating as they gather momentum and scale.”

To give a sense of that scale, Tinder has about 10 million users making 15 million matches a day, and was launched just two years ago.

Matt Verity, the co-founder of another dating app, TrueView, explained: “The new generation of dating app creators have a very different attitude to the traditional sites. We look at a person’s actual behaviour, to create a genuine, up-to-date, real-time view of their personality.”

But why did Cupid sell the biggest and most successful part of its business – the “casual dating” bit – last year? At the time bosses said the “casual” part was becoming too niche and too “adult orientated”, which was something they wanted to distance the company from.

The “casual” parts are now owned by a British Virgin Islands firm, Grendall, controlled by Mr Poltakov. He also bought the final chunk of the company yesterday, through a web of companies all based on the infamous Caribbean tax haven.

So essentially, Mr Poltakov helped launch Cupid as a listed company; watched the share price soar; quit from the company in 2012 and later sold his stake; then snapped up a good part of the business.

There is nothing in the AIM rules that stops any of this from happening. In fact, shell companies on AIM and the other small indexes are at highs not seen since rule changes in 2006 about how long they can remain inactive. According to Growth Company Investor, there are now 108 shells with cash of more than £500m between them.

Mr Dobbie, meanwhile, is left nursing his substantial stake in Cupid plc as he assesses the damage and decides what to do with the £18m in the bank and how he can persuade the remaining shareholders they should stick with him.