Shares of the photo editing app Meitu rose 14.4% on Monday morning after the company said it had bought $40 million of cryptocurrencies
(ATF) Following Tesla's bitcoin investment announcement in early February, that didn't just make headlines but also bumped up its bottom-line, Chinese photo-editing app Meitu Inc has said it too has jumped on the bandwagon.
Meitu is the latest company to say it will hold cryptocurrencies as part of its treasury operations, following Tesla’s big-bang announcement.
In an exchange filing on Sunday evening Hong Kong-listed Meitu announced it had bought $40 million worth of cryptocurrencies – which led to its shares rising as much as 14.4% on Monday morning.
When Tesla disclosed in its annual 10-k filing on February 8, that it bought $1.5 billion worth of bitcoin in January, its shares rose 2% on the news and sent the token’s price up by 20% as well.
Given the cryptocurrency's current price level – $49,680 – on Monday, if Tesla owns the same amount of Bitcoin as it did on January 31, the company has made a paper profit of $840 million since then. That is about 18% more than its $721 million revenue from electric vehicles, as per its last report.
Ether and Bitcoin
The beauty-focussed technology firm said that it bought $22.1 million worth of Ether, the world’s second-largest cryptocurrency by market capitalisation, and $17.9 million worth of Bitcoin on March 5.
Meitu said the purchase was partly for investment and partly as preparation to enter the blockchain industry, and that it would finance this from its existing cash reserves.
The company is evaluating the feasibility of integrating blockchain technologies into its overseas businesses, which could include projects on the Ethereum blockchain network.
Ether powers contracts and applications on the Ethereum network, and so purchasing it was a “logical preparation”, the filing said.
Meitu, which dominated the portrait touch-up space in China in the early 2010s, has been reportedly struggling to hold on to leadership status ever since smartphones started offering built-in filters and photo editors like Meitu.
Meitu’s stock has dropped from HK$18 apiece in 2017 to less than HK$3 today.
But as the company turns 13 years old and seeks alternative growth, it seems to have set its eyes on crypto-currency investing.
This investment is the first tranche of the firm’s investment plan to buy up to $100 million worth of crypto, the company said, reinforcing its chairman Cai Wensheng’s interest in blockchain technologies.
Though China has banned initial coin offerings and crypto trading exchanges, Cai said in 2018 that he personally bought about 10,000 bitcoins.
His support for cryptocurrencies is also manifested in Meitu’s latest investment move.
“The Board takes the view that blockchain technology has the potential to disrupt both existing financial and technology industries, similar to the manner in which mobile internet has disrupted the PC internet and many other offline industries. The Board believes that the blockchain industry is still in its early stage, analogous to the mobile internet industry in circa 2005,” the exchange filing said.
“Against this backdrop, the Board believes cryptocurrencies have ample room for appreciation in value and by allocating part of its treasury in cryptocurrencies can also serve as a diversification to holding cash treasury management,” the statement added.
Meitu said the bitcoin investment is part of its “asset allocation” plan, while the bet on Ether will aid its general blockchain endeavour. Indeed, it’s considering putting blockchain into its various overseas businesses, including Ethereum-based dApps.
It’s also looking to invest in overseas blockchain projects “that can be synergistic to its large user base".
Meitu claims it has nearly 300 million monthly active users on its suite of apps released across the globe.
- With reporting by Reuters.