Gay dating app Grindr is now up for sale. The reason? It's Chinese-owned.
After the high-profile cases of ZTE and Huawei, the California-based networking app that caters to “gay, bi, trans and queer people” is the latest target of US government scrutiny on Chinese investment in key economic sectors. For the US, the company’s relationship with China has in fact proven to be a deal-breaker.
The Committee on Foreign Investment in the United States (CFIUS) informed the Chinese gaming company Beijing Kunlun Tech Co., Ltd., which obtained total control of Grindr’s shares in 2017, that its ownership of the company constitutes a national security risk, as reported by Reuters in an exclusive piece based on anonymous sources on March 27.
According to insiders, the CFIUS verdict in fact forces the Chinese group to sell its stakes in the company, right after it announced in August it was preparing Grindr, which has been profitable for the past three years, to go public. Sources told Reuters that Kunlun Tech has already hired investment bank Cowen Inc. to handle the sale process.
READ MORE: Chinese Gaming Company Buys Grindr
On Monday, Reuters further reported the gaming company had admitted it was in talks with the CFIUS about its ownership of the American company in a brief to the Chinese Securities Regulatory Commission, though no agreement has been reached.
The CFIUS, a US inter-agency group that oversees foreign deals, has not provided details on its decision to avoid revealing classified information pertaining to the working of US agencies.
The CFIUS’ negative feedback on the deal comes years after Kunlun acquired 62 percent of the social networking platform in 2016 and later completed the acquisition in the summer of 2017, for a total investment of USD240 million. The deal was an attempt by the Chinese company, which also acquired internet browser Opera in 2016, to expand in the fast-growing sector of online social networking and becoming a “leading social media company,” Kunlun declared in 2017. Coming during a period of increased concern for the ownership and privacy of users’ data, this retroactive assessment of the acquisition was possible since the group had not previously submitted the deal to the committee, which vets deals based on voluntary submission by the involved parties.
Grindr, which defines itself as “the world’s largest social networking app for gay, bi, trans, and queer people,” had reported a daily active user base of 3.3 million as of 2016, according to the Financial Times, and is currently celebrating its 10th year of activity. Unfortunately for Beijing Kunlun Tech, though, the anniversary came together with controversy.
Before the CFIUS raised questions of national security, the app came under fire last year after sharing users’ personal information, including their HIV status, to third parties. Now, concerns about the company seem much more political.