The Latest: Chinese beauty app Meitu Inc. (1357.HK) said on Sunday it will purchase the remaining 19.81% of its majority-owned Ruisheng Tianhe subsidiary from a minority shareholder group for up to HK$248 million ($31.8 million). It said it was required to make the purchase after Tianhe failed to list on a China stock exchange within a required timeframe.

Looking Up: Meituan announced it would sell the stake to a minority shareholder group in December 2020, with the condition that Ruisheng Tianhe be listed in China by the end of 2022. Taking back full ownership now will give Meitu more flexibility to develop Ruisheng Tianhe, which is profitable and provides advertising and game publishing services that complement Meitu’s core advertising business.

Take Note: The failure to list Ruisheng Tianhe means not only that Meituan won’t get any funds from such a listing, but that it may also have to provide future funding if Ruisheng Tianhe starts losing money in the future.

Digging Deeper: Meitu was founded in 2008 as a beauty app providing tools for editing photo images. The company later started providing B2B services to businesses like cosmetic shops and photo studios. It made headlines in April 2021 after reporting a $100 million bet on bitcoin and ether cryptocurrencies which ultimately led to a 28.5 million yuan write-down in its 2021 results. Despite economic headwinds, Meitu managed to record 20.5% revenue growth in the first half of 2022 as strong VIP subscriptions offset its slowing advertising revenue.

Market Reaction: Meitu’s stock rose 5.84% to HK$1.45 by the Tuesday mid-day trading break on the first trading day in Hong Kong after the New Year holiday. The stock now trades near its 52-week high.

Reporting by Chan Ka Po

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