Chinese live streaming platform Inke acquires Jimu in a USD 85 million bet

This may deal a heavy blow to its full year balance sheet this year.

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Inke, one of the few live streaming platforms in China that have gone public in the capital markets, said on Monday that it has agreed to acquire 100% interests in Beijing-headquartered social networking app Jimu, at USD 85 million.

Jimu is a social networking platform mainly targeting young people who enjoy art, fashion and music, developed and operated mostly in the Chinese mainland.

Currently, approximately 80% of Jimu’s users are born after 1995, coming from first and second-tier cities in China, said Inke in a filing with the Hong Kong Stock Exchange. Inke also indicated that Jimu ranked top 10 among social networking apps and top 100 among all apps in 2019. However, Inke did not disclose how many users Jimu has now.

Inke pointed out that there is a low overlap between the users of Jimu and those of its self-branded existing products, which makes them complementary to each other. The move will bring synergy effects and financial value in the short term, Inke stated.

Although Jimu recorded a net loss of RMB 17.7 million (about USD 2.57 million) last year, as the filing shows, Inke said it expects this networking app to bring significant financial returns shortly. Revenues are expected from users’ membership fees, sales of virtual currencies, and advertising fees, Inke said.

The live-streaming platform also announced in another filing on Monday that it may record a net loss of around RMB 60 million for the first half of this year.

The company made a net profit of RMB 1.1 billion in 2018, thanks to its 25.5 million monthly active users on average during 2018, up 12.3% from 2017. However, the company’s revenue fell to RMB 3.86 billion in 2018, from RMB 3.94 billion in 2017 and RMB 4.33 billion in 2016, due to “intense competition within the mobile interactive entertainment industry, internally and externally”.

The mobile interactive entertainment industry has entered into a steady growth stage, and is becoming more centralized, Inke said in its 2018 annual report.

It’s also seeing a fair share of consolidation. Panda TV, China’s third-largest game-centric live streaming site with 7.22 million monthly active users, went bankrupt in March.

Other major Chinese platforms in live streaming include YY, which is listed on the Nasdaq, as well as gaming centric streaming sites Douyu and Huya.