What happened: In accordance with a prior agreement, photo-editing app Meitu announced that it would trade shares to purchase 31% of Dreamscape Horizon, an indirect wholly-owned subsidiary of Leyou Technology, a gaming company. The sale will cost HKD 2.69 billion (about $343 million), with Leyou gaining around 19% of Meitu in exchange. Dreamscape Horizon indirectly owns 97% of North American developer Digital Extremes, maker of PC and console games. Its successes include Warframe, a bestselling game on Steam in 2018. The tradeoff is intended to bolster Meitu’s revenue and user base by adding games into the mix.
Why it’s important: After going public on Hong Kong’s stock exchange in late 2016, Meitu’s share price has plummeted from an original price of HKD 8.50. Not only did monthly active users drop 15% from 2017 to 2018, but the company also reported losses of RMB 127 million in the first half of 2018, according to National Business Daily. In an attempt to ameliorate its losses, last November Meitu signed an agreement with smartphone giant Xiaomi to hand over control of its struggling line of phones. At the time, Meitu said this move would allow them to focus on their image processing software. Adding games to its repertoire could win back its young user base. However, it might prove to be a stretch for a company best known for photo-editing and ‘beautifying’ effects.