Grindr's Chinese ownership on table amid blackmail concerns
01 April, 2019
Beijing Kunlun Technology, the Chinese owner of Grindr, says it has yet to reach any agreement with U.S. authorities in response to reports that the firm has been forced to sell the gay dating app amid concerns that its ownership constitutes a national security risk.
Kunlun is currently communicating with the Committee on Foreign Investment in the U.S. (CFIUS), a federal panel focused on national security, regarding its ownership of Grindr but so far the two sides have not reached a deal, the Beijing-based company said in a filing to the Shenzhen Stock Exchange on Monday.
Kunlun, a little-known Chinese video game company, took full ownership of one of the world's most popular LGBTQ social networking platforms based in West Hollywood, California, through two deals between 2016 and 2018 worth US$245 million in total.
CFIUS has ordered Kunlun to sell Grindr citing the risk that the personal data it handles could be exploited by Beijing to blackmail American officials or defence contractors, according to reports from The New York Times and The Wall Street Journal, citing unnamed sources. Reuters first reported the case on Wednesday.
Kunlun and CFIUS did not immediately respond to emailed requests for comment.
Kunlun said in its filing that since the takeover, the company has increased Grindr's market share and monetisation ability "in accordance with the laws and regulations where the business is operated". In 2018 the gay dating app recorded 572 million yuan (US$85 million) in operating revenue, and had total assets of 215 million yuan, according to unaudited figures cited in the filing.
Founded in 2008, Kunlun specialises in publishing browser-based video games. It is also the China distributor of Clash of Clans, a hit mobile game created by Finnish developer Supercell, which in 2016 was acquired by internet giant Tencent.
Following a Shenzhen IPO in 2015, Kunlun expanded into social media and content, acquiring stakes in companies including Norwegian browser developer Opera and Chinese live-streaming network Inke. The Grindr takeover was described by Kunlun as "critical" to its bid to become a global internet company.
In August, Kunlun started preparations for an overseas public listing of Grindr. The timing of the listing is dependent on conditions in international capital markets and progress on approvals by domestic and overseas regulators, Kunlun said in a filing in Shenzhen at the time.
The CFIUS intervention, however, would put an end to that process. It would also represent a rare case where the inter-agency body, led by the U.S. Treasury Department, has moved to undo an acquisition that has already been completed.
Kunlun bought a 60 per cent stake in Grindr in 2016. Grindr's founder and CEO, Joel Simkhai, stepped down in 2018 after the Chinese firm bought the remaining stake.
The CFIUS intervention comes as the Trump White House increases its scrutiny of Chinese investment in American technology amid ongoing trade tensions. U.S. officials are drafting curbs to block acquisitions of American companies with "industrially significant technology," such as chips and weapons, by firms with 25 per cent or more Chinese ownership, according to reports from Reuters and the Wall Street Journal in June 2018, citing unnamed sources.
Grindr said it is the world's biggest social networking app for LGBTQ people, with 27 million users as of 2017. The dating app collects personal data submitted by its users, including one's location, messages, and in some cases HIV status, according to its privacy policy.
In April, Grindr announced that it would stop sharing user's HIV status with third-party software vendors, after the app faced a backlash over the practice.
Kunlun is currently communicating with the Committee on Foreign Investment in the U.S. (CFIUS), a federal panel focused on national security, regarding its ownership of Grindr but so far the two sides have not reached a deal, the Beijing-based company said in a filing to the Shenzhen Stock Exchange on Monday.
Kunlun, a little-known Chinese video game company, took full ownership of one of the world's most popular LGBTQ social networking platforms based in West Hollywood, California, through two deals between 2016 and 2018 worth US$245 million in total.
CFIUS has ordered Kunlun to sell Grindr citing the risk that the personal data it handles could be exploited by Beijing to blackmail American officials or defence contractors, according to reports from The New York Times and The Wall Street Journal, citing unnamed sources. Reuters first reported the case on Wednesday.
Kunlun and CFIUS did not immediately respond to emailed requests for comment.
Kunlun said in its filing that since the takeover, the company has increased Grindr's market share and monetisation ability "in accordance with the laws and regulations where the business is operated". In 2018 the gay dating app recorded 572 million yuan (US$85 million) in operating revenue, and had total assets of 215 million yuan, according to unaudited figures cited in the filing.
Founded in 2008, Kunlun specialises in publishing browser-based video games. It is also the China distributor of Clash of Clans, a hit mobile game created by Finnish developer Supercell, which in 2016 was acquired by internet giant Tencent.
Following a Shenzhen IPO in 2015, Kunlun expanded into social media and content, acquiring stakes in companies including Norwegian browser developer Opera and Chinese live-streaming network Inke. The Grindr takeover was described by Kunlun as "critical" to its bid to become a global internet company.
In August, Kunlun started preparations for an overseas public listing of Grindr. The timing of the listing is dependent on conditions in international capital markets and progress on approvals by domestic and overseas regulators, Kunlun said in a filing in Shenzhen at the time.
The CFIUS intervention, however, would put an end to that process. It would also represent a rare case where the inter-agency body, led by the U.S. Treasury Department, has moved to undo an acquisition that has already been completed.
Kunlun bought a 60 per cent stake in Grindr in 2016. Grindr's founder and CEO, Joel Simkhai, stepped down in 2018 after the Chinese firm bought the remaining stake.
The CFIUS intervention comes as the Trump White House increases its scrutiny of Chinese investment in American technology amid ongoing trade tensions. U.S. officials are drafting curbs to block acquisitions of American companies with "industrially significant technology," such as chips and weapons, by firms with 25 per cent or more Chinese ownership, according to reports from Reuters and the Wall Street Journal in June 2018, citing unnamed sources.
Grindr said it is the world's biggest social networking app for LGBTQ people, with 27 million users as of 2017. The dating app collects personal data submitted by its users, including one's location, messages, and in some cases HIV status, according to its privacy policy.
In April, Grindr announced that it would stop sharing user's HIV status with third-party software vendors, after the app faced a backlash over the practice.