Chinese photo app maker Meitu Inc's first-half 2016 losses widened as, in keeping with accounting norms, it booked losses for a jump in the value of shares issued to investors ahead of a planned IPO, the company's listing documents showed.
Chinese photo app maker Meitu Inc’s first-half 2016 losses widened as, in keeping with accounting norms, it booked losses for a jump in the value of shares issued to investors ahead of a planned IPO, the company’s listing documents showed.
Meitu’s losses widened to 2.19 billion yuan ($330 million) for the six months ended June 2016, compared with 1.27 billion yuan in the same period in 2015.
Losses for all of 2015 reached 2.22 billion yuan, versus the 1.77 billion yuan losses in 2014, according to a preliminary IPO document posted on the Hong Kong stock exchange late on Monday.
The company has raised $500 million in five funding rounds from investors including venture capital funds IDG Capital Partners, Qiming Venture Partners and Tiger Global by issuing convertible preferred shares.
Under International Financial Reporting Standards, those funds raised are considered a liability, and as the value of the shares rise it becomes a bigger liability for the company, which is reflected in the books.
The loss on account of those shares nearly doubled to 1.92 billion yuan in the first half of 2016 from a loss of 972.8 million yuan a year earlier, contributing to the bulk of the company’s losses for the period, Meitu said.
Meitu is mostly known for photo-related mobile phone apps, but 95 percent of its revenue comes from the sale of smartphones, where it competes with much larger players including Huawei Technologies Co Ltd, Xiaomi Inc and Apple Inc .
Thomson Reuters publication IFR previously reported Meitu’s IPO could raise up to $700 million in Hong Kong.
Despite being the world’s top destination for IPOs so far in 2016, Hong Kong has failed to attract a significant number of listings from Chinese technology companies, with the majority of internet startups and software makers choosing to go public in New York instead.
Funds raised from those companies have accounted for 6 percent or less of all IPOs in the Asian financial hub in each year since the global financial crisis in 2008, Thomson Reuters data showed.
($1 = 6.6456 Chinese Yuan Renminbi)