Facing lawsuits from 13 attorney generals, Grindr's new owners hired the retired Head of Global Privacy from Yahoo. On his first call, the AGs recognized him and his reputation. This single "talent upgrade" signaled the company was now run by professionals, leading 12 of the 13 AGs to effectively drop their issues.

A specific arbitrage opportunity exists with serial acquirers. When they announce a deal that will significantly increase future earnings per share, the market often under-reacts. An investor can buy shares at a compressed forward multiple before the full impact of the acquisition is priced in.

The U.S. government (via CFIUS) forced Grindr's Chinese owner to sell within one year over national security concerns. This created a distressed, time-sensitive M&A situation with a limited buyer pool, which savvy, non-traditional investors were able to capitalize on.

Investing in founders like Rippling's Parker Conrad or Anduril's Palmer Luckey post-controversy is a bet that the media narrative was wrong and they were unfairly 'thrown under the bus.' It's a high-conviction strategy focused on backing resilient individuals who emerge from public firestorms stronger and more focused.

Investors often reject ideas in markets where previous companies failed, a bias they call "scar tissue." This creates an opportunity for founders who can identify a key change—like new AI technology or shifting consumer behavior—that makes a previously impossible idea now viable.

Grindr generated $100M in revenue and $45M in profit despite a dismal 1.8-star App Store rating and 19% Glassdoor score. These terrible qualitative metrics, paired with strong financials, indicated the company was severely undermanaged and ripe for a turnaround through basic operational improvements.

Grindr's new owners identified that the app had not implemented any of the successful product and monetization strategies proven by Tinder. Simply applying this known playbook—like introducing boost features, optimizing pricing, and improving buy flows—provided a clear path to doubling revenue in under three years.

Grindr's buyers capitalized on a market inefficiency where traditional PE firms, despite strong financials, avoided the deal due to its association with the gay community. This "homophobia discount" allowed them to acquire a highly profitable asset for at least 50% less than its market value.

A core discipline from risk arbitrage is to precisely understand and quantify the potential downside before investing. By knowing exactly 'why we're going to lose money' and what that loss looks like, investors can better set probabilities and make more disciplined, unemotional decisions.