On the eve of its $1.2b IPO, Tencent Music is being sued by an investor
Hanwei Guo claims he was defrauded and intimidated into relinquishing his early shares before TME grew to be a multi-billion dollar empire.
Now he wants a percentage of those shares back, and to be paid for his loss.
He says that in 2012, TME co-president Guomin Xie Guo repeatedly invited him to put money into his company Ocean Music.
He promised it would turn a profit within a year, and go public in the US in three years and make him a considerable profit.
Han invested the equivalent of $26 million, only to be then told that the business was failing.
He was then “intimidated” and “tricked” with “misinformation” into selling his shares at less than their value, which he did “under duress”.
He insisted he was not allowed to get background information on Ocean Music’s financial failings despite the fact that other investors had pumped a total $100 million into the company.
Ocean Music eventually became part of TME after Tencent’s QQ Music and China Music Corporation merged in 2016.
Since then TME has become one of the great digital music success stories, with 800 million monthly users across multiple apps.
Unlike Spotify, it is actually making money.
For the quarter ended September 30, 2018, Tencent Music’s revenue reached $2 billion – up 83.7% over the same quarter in 2017 when it reported $1.1 billion in revenue.
Adjusted profits in this 2018 quarter were $474 million, up 162.9% in the same period 12 months before.
Hanwei Guo has filed a motion for discovery in the US seeking information from Deutsche Bank AG, JPMorgan Chase & Co., Bank of America Corp. and other underwriters for TME’s IPO.
He will use this information in a court matter underway in China.
He wants TME to return a percentage of the $26 million he initially put in, and also compensate him for his financial losses.
TME initially planned to delay its IPO because of the weakening stock markets around the world – especially with tech stock.
But it resumed its process and filed with the US Securities and Exchange Commission on December 3.
According to its prospectus, TME plans to raise up to $1.23 billion with a listed price between $13 to $15 per share.
It reportedly is beginning to take orders on December 12.