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Cupid PLC In The Clear After Allegations Of Fake Users

Shares in Cupid (LSE: CUP) rose 7% in early trade, as the online dating company announced the results of an independent review led by KPMG into allegations against its operating practices.

The inquiry supported Cupid’s rebuttal of speculation that the company employed members of staff to create fake profiles in order to encourage customers to take out subscriptions or to retain existing customers, which saw the share price crash 57% in one day back in February this year.

The shares have since recovered, boosted by the findings by KPMG that found “no evidence of a company-organised practice of staff enticing registered members to subscribe through use of fake profiles”.

However, the review did highlight that ‘Motivation’ staff operating on the sites were not clearly identified, which could cause confusion “in interactions with customers or subscribers”. Cupid has since formed a team of ‘Dating Advisors’ to replace the Motivation team and eliminate confusion, and to provide users with live help.

A number of areas where existing controls and practices could be improved — including within marketing, governance, technical controls and risk management — have been highlighted within the review, with Cupid management stating that it will implement these recommendations.

The shares had started the year at nearly 200p, with the price fall and allegations prompting chief executive Bill Dobbie to invest £1m at 114p the other week.

The current price values Cupid at about 5 times earnings, though whether the stock now represents a value bargain or value trap is something that you must decide for yourself.

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> Sam does not own any share mentioned in this article.