Metaverse dating app popular with young people in China vies for HK listing

Soul, a social media app backed by Tencent, a metaverse dating platform popular with young people in China, is in the running for a listing in Hong Kong after it abruptly withdrew a plan to sell shares in the United States l ‘last year.

Soul owner Soulgate filed documents in Hong Kong this week revealing that the company racked up a loss of Rmb1.3 billion ($194 million) last year out of Rmb1.3 billion in annual sales. Still, it attracted tech giant Tencent, which bought a 49.9% stake in the company as of 2020.

The social app lets users choose avatars and interact in the metaverse, with many of its 32 million users flocking to its app for dating. Soul prides itself on connecting users algorithmically based on personality and interests, a strategy also used by ByteDance’s TikTok, which is now one of the most popular apps in the United States.

Unlike traditional dating platforms, Soul users use avatars – which often look like Japanese anime – instead of profile pictures. The app also includes games.

“You don’t have to post photos, so you can be yourself in front of complete strangers and say what you really mean,” said one user, who asked to remain anonymous.

But the headwinds to a successful listing of Soul in Hong Kong are significant. Investors have largely sold shares in unprofitable tech companies this year, and unpredictable regulations in China, especially for data-rich consumer internet companies, could overshadow the growth story.

Wang Qingrui, an independent internet industry analyst, said Soul delisted in the United States after rival social app Uki targeted its business practices last year, alleging unfair competition in a lawsuit.

The case arose from two Soul employees who posted pornographic images on Uki’s platform and then reported violations to the company, leading Chinese regulators to ban downloads of its app.

Soul said the two employees acted “without our permission” and are no longer with the company. Both employees were found guilty.

Wang expected Soul’s chances to be better this time. “Trying to enter this type of market, they must already be carefully prepared,” he said.

Last week, Chinese podcasting platform Ximalaya suspended plans to raise just $100 million in Hong Kong after investors wary of increased regulation pushed back on its sales pitch.

Chinese tech listings in the financial hub have largely evaporated due to a crackdown on the sector launched a year ago by Beijing. The country’s securities regulator has yet to issue finalized rules to govern a new stock offering regime outside mainland China.

Soul’s more than one million users could also subject the company to a data security review by China’s dreaded Cyberspace Administration, another regulatory hurdle with an unclear timeline.

In its Hong Kong listing application submitted on Thursday, the company said there “remains substantial uncertainty” about whether it will have to go through a cybersecurity review or receive approval from the securities regulator.

Shanghai-based Soulgate suspended plans to list in the United States a year ago after filing with the United States Securities and Exchange Commission to sell shares on the Nasdaq stock exchange in New York.

The suspension turned out to be fortuitous. Days later, China’s internet regulator launched an unprecedented probe into carpooling group Didi, along with two other data-rich internet companies that had recently sold shares in the United States.

Didi’s apps remain suspended in app stores while the other two companies, Boss Zhipin and Full Truck Alliance, were finally allowed to start recruiting new users on Wednesday.

Documents filed with the SEC show that the New York stock offering and a concurrent private placement would have raised up to $257 million for Soul, which it planned to use to fuel its growth.

Underwriters for the canceled U.S. listing included Morgan Stanley and Bank of America, with the latter co-sponsoring the Hong Kong IPO alongside Chinese investment bank CICC.

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