Shares in online dating firm Cupid bounced back yesterday as the Edinburgh-based company rebutted claims its business is “fundamentally flawed, inappropriate or illegal”.
The group which operates a string of sites saw its market value plummet by more than half late on Friday as it announced an audit into the way it operates.
But stock climbed 61% during yesterday’s early trading, eventually closing up 53.06% at 75p, after a detailed statement from the firm revealed it was taking legal advice over “a great deal of misrepresentation and ill-informed speculation in the marketplace”.
Cupid had earlier been forced to deny that it created user profiles to entice new customers to sign up to paid-for services.
“Following the executive directors’ investigation into the allegations across various media, the board unanimously concluded that the company does not employ members of staff to create fake profiles, impersonate users or use any other dubious practice to encourage customers to take out subscriptions or in order to retain existing customers, nor would the company condone, promote or persuade employees to do so,” the company statement said.
The rapidly-growing firm doubled its revenues to more than £80 million last year, helped by 102% growth in new markets.
Pre-tax profits from its 54 million members and 58 territories climbed 31% to £9.2m.
It has commissioned an independent audit of its customer database and database management processes, which is expected to report by the end of June.
Directors have already completed an internal investigation.
Cupid has already revealed that it has a 24-strong “motivation team”, with staff working across three shifts and “covering a range of websites and companies”.
It says the team only communicates with new subscribers to help them “get the most out of the site”, while also proactively monitoring for technical issues and moderating chat rooms and forums.
But the AIM-listed firm said the allegation that members on a three-day trial membership were encouraged to take up a full subscription by messages created by Cupid employees would be directly addressed by the audit. The group outright rejected the claim it creates fake profiles to entice prospective users.
“Cupid does not behave in this manner and the company does not condone any practices where employees use misleading activities to entice customers into new, or to renew, subscriptions,” it said.
“Like many online companies, Cupid employs a motivation team as part of its focus on customer service in certain territories and brands. This team carries out mystery shopping, monitors and interrogates the sites in order to detect and identify any technical or product issues proactively, and moderates chat rooms and forums.
“To reaffirm: the internal investigation, launched in response to recent allegations, concluded that this team does not communicate with free members, nor does it exist to entice paying subscribers to renew. The team is not incentivised to convert or extend memberships.”
It said online scamming was a problem with the dating industry one of many sectors targeted but added that the company was investing in “increasingly sophisticated tools and systems to discourage, deter and eliminate this type of practice”.
Meanwhile, Cupid said trading was well ahead of the same period last year, with revenues up 20%.
The company said it had a “strong” financial position, with cash at bank in excess of £9m following a £3m share buyback, considerable marketing investment and having paid the full £2m consideration for the acquisition of forces- and services-targeted Uniform Dating.
The company said it would also receive £2.2m during the next three months following the agreement of an accelerated repayment schedule from Interactive Dating & Entertainment.