Days Before Tencent Music’s IPO Launch, a Mysterious Investor Claims to Own 80% of the Company
Does Hanwei Guo really own 80% of Tencent Music? Or, ahead of the Chinese streaming music giant’s IPO, are the trolls coming out of the woodwork?
For months, Chinese conglomerate Tencent Holdings has been frantically preparing for its music division’s upcoming listing on Wall Street.
Originally set for October 18th, Tencent Music delayed its IPO due to turbulent market conditions.
Now, following a truce between the US and China, executives have pushed forward. Tencent Music will go public on December 12th, a rare move for large-scale IPOs.
Unlike Spotify, the Chinese streaming music giant remains very healthy and continues to make a profit.
For the nine months ended September 30th, 2018, the company reported a profit of $394 million. Last year, Tencent Music reported $114 million in profits.
Once the company goes public, executives expect to raise up to $1.41 billion from the IPO.
One person, however, threatens to indefinitely delay Tencent Music’s public listing.
A mysterious ‘investor’ takes on a streaming music giant.
Currently, Tencent Music owns three streaming music platforms in China – QQ Music, Kuguo, and Kuwo. In total, the company counts over 700 million monthly active users with around 14 to 21 million subscribers.
According to Hanwei Guo, however, he hasn’t earned a dime from his early investment in the company.
In a motion for discovery filed yesterday at the US District Court for the Southern District of New York, Guo has made a strong claim against the Chinese streaming music giant.
The “distinguished investor” allegedly invested in Tencent Music when it was known simply as Ocean Interactive Technology. He likens the investment to the “equivalent of tens of millions of dollars.”
According to Guo, Tencent Music Entertainment Co-President Guomin Xie stole his assets. Xie and other “conspirators” allegedly used misinformation, threats, and intimidation. Succumbing to the Co-President’s brutal tactics, Guo sold his 80% shares in Tencent Music, originally known as Ocean Music.
Billing himself as a “victim of fraud and coercion at the hands of Mr. Xie,” Guo wants a US court to obtain information for use in a pending arbitration in China. Guo claims he currently has a case against Xie and “Arbitration respondents” before the China International Economic and Trade Arbitration Commission (CIETAC). The information, he says, will help him regain control of Tencent Music’s assets. One of Xie’s conspirators allegedly presented him with “documentary proof” of the conspiracy.
To that end, Guo wants a court to hand over information about Tencent Music’s IPO from multiple firms. This includes Deutsche Bank, JP Morgan, BofA Merrill Lynch, Pierce, Fenner & Smith, and Morgan Stanley. Guo writes this information will boost his case against Tencent Music at the CIETAC.
According to a spokesperson for Guo, it remains “illegal and unlawful” for the company to move forward with the IPO.
“We believe a review of the circumstances and facts surrounding this matter clearly show that Mr. Xie, who is now Tencent Music’s Co-President, used unlawful intimidation tactics and threats to defraud a respected, honorable investor. It is unfortunate that Mr. Xie and other respondents have not righted this wrong prior to Tencent Music’s December 12 initial public offering in the United States, where shareholders and regulators hold companies and their officers to high standards of conduct.”
Unfortunately, very little remains known about Guo and his claim. This begs the question of whether the discovery request will actually go through or whether his claims have any validity.
After all, Guo has only filed the discovery request right before Tencent Music will go public. And, it’s only natural for non-investors (i.e., trolls) to attempt to profit from the company’s success.
You can view the lawsuit below.
Featured image by UDTech (YouTube screengrab).