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Chinese owner scraps Grindr IPO as US raises security concerns

CFIUS tells Kunlun to unload gay dating app on fears of private data leak

The Grindr app is seen on a mobile phone in this photo illustration taken in Shanghai.    © Reuters

NEW YORK -- Beijing Kunlun Technology, the Chinese owner of gay dating app Grindr, is under the spotlight following reports that it is trying to sell the platform operator after the U.S. raised national security concerns.

The Committee on Foreign Investment in the United States, a federal panel, has told Kunlun its ownership of California-based Grindr constitutes a threat to American national security, as the dating platform could expose sensitive private data, including HIV status, to Chinese authorities, Reuters first reported Wednesday.

Kunlun, which has nearly $2.5 billion in market capitalization on the Shenzhen Stock Exchange, acquired a majority stake in the U.S. social media platform in 2016 and bought out the rest of it in 2018. Between the two investments, Grindr's valuation jumped more than 160%.

The Chinese company announced last summer that Grindr would pursue an IPO on a stock exchange outside China, a plan now likely scrapped given the emerging scrutiny. The U.S. Treasury Department declined to comment. Kunlun did not respond to a request for comment. 

Founded in 2008, Beijing-based Kunlun started out in gaming but has since diversified to sectors like social media and financial technology.

Since it went public in 2015, Kunlun has made dozens of investments in other companies, some of which have yielded millions of dollars in returns.

Kunlun made more than $70 million from its stake in Qudian, a Xiamen, China-based consumer credit provider now traded on the New York Stock Exchange, a regulatory filing reveals. Kunlun's returns on this investment were equivalent to about half of its net profit for the entire year of 2017.

Kunlun first took a position in Qudian in 2015, one year after the startup's founding, and announced its intention to exit completely in late 2018, one year after Qudian's IPO.

Zhou Yahui, Kunlun's billionaire founder and a former executive at China's onetime social media hit Renren, sees himself as a man with the Midas touch.

In a column published after Qudian's listing in 2017, he projected that at least 10 of the companies he has invested in will have gone public by 2020.

"If not, then the biggest reason would probably be they do not follow my advice," he wrote.

The latest on track to fulfill the IPO prophecy is Ruhnn Holding, China's largest incubator of online influencers, which is also backed by e-commerce giant Alibaba Group Holding and has recently filed for a listing on the U.S. Nasdaq market.

Kunlun's most high-profile private exit was from social media app Musical.ly, which was acquired by ByteDance in 2018 for around $1 billion and later merged with TikTok. Kunlun bought a $20 million stake in the short video platform in 2016, the value of which more than doubled by the divestment.

Most recently in February, Kunlun announced it will acquire a 10% stake in an leading online consumer finance platform, Finnov, which is registered in Singapore and operates in India.

Kunlun is also chasing growth in regions like Africa and Southeast Asia with Opera, the Norwegian web browser where it is now a 48% shareholder. Opera went public on the Nasdaq in a 2018 IPO that raised $115 million, but share prices have since fallen by almost half.

The clash over Kunlun's ownership of Grindr came as a trade war drags on between the U.S. and China, which are struggling to reach agreements over issues including forced technology transfers.

Washington's committee on foreign investment has also blocked Alibaba affiliate Ant Financial's $1.2 billion acquisition of money transfer service, MoneyGram, and banned the presence of Chinese tech giant Huawei Technologies from its government contracts, for fear of exposing itself to Beijing's espionage.

Since Kunlun's first investment in Grindr, the dating platform's registered users have quadrupled, regulatory filings from the Chinese company show. The app also added a feature allowing users to disclose their HIV status on their public profile.

Last April, Norwegian research group SINTEF revealed in an analysis that Grindr leaked users' health status to third-party companies. In a statement, Grindr said it had never sold such information to third parties and that users remain in control of all information they choose to share.

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