US puts pressure on Grindr’s Chinese owner to swipe left
Chinese gaming company Beijing Kunlun Tech is seeking to sell Grindr, the popular gay dating app it has owned since 2016, after a US government national security panel raised concerns about its ownership, according to people familiar with the matter.
The Committee on Foreign Investment in the US (CFIUS) has informed Kunlun that its ownership of, California-based Grindr constitutes a national security risk, the two sources said.
CFIUS's specific concerns and whether any attempt was made to mitigate them could not be learnt. The US has been increasingly scrutinising app developers over the safety of personal data they handle, especially if some of it involves US military or intelligence personnel.
Kunlun had said last August it was preparing for an IPO of Grindr. As a result of CFIUS's intervention, Kunlun has now shifted its focus to an auction process to sell Grindr outright, given that the IPO would have kept Grindr under Kunlun's control for a longer period of time, the sources said.
Grindr has hired investment bank Cowen to handle the sale process, and is soliciting acquisition interest from US investment firms, as well as Grindr's competitors, according to the sources.
The development represents a rare, high-profile example of CFIUS undoing an acquisition that has already been completed. Kunlun took over Grindr through two separate deals between 2016 and 2018 without submitting the acquisition for CFIUS review, according to the sources, making it vulnerable to such an intervention.
The sources asked not to be identified because the matter was confidential.
Kunlun representatives did not respond to requests for comment. Grindr and Cowen declined to comment. A spokesperson for the US department of the treasury, which chairs CFIUS, said the panel did not comment publicly on individual cases.
CFIUS's intervention in the Grindr deal underscores its focus on the safety of personal data, after it blocked the acquisitions of US money transfer company MoneyGram International and mobile marketing firm AppLovin by Chinese bidders in the last two years.
CFIUS does not always reveal the reasons it chooses to block a deal to the companies involved, as doing so could potentially reveal classified conclusions by US agencies, said Jason Waite, a partner at law firm Alston & Bird focusing on the regulatory aspects of international trade and investment.
"Personal data has emerged as a mainstream concern of CFIUS," Waite said.
The unravelling of the Grindr deal also highlights the pitfalls facing Chinese acquirers of US companies seeking to bypass the CFIUS review system, which is based mostly on voluntary deal submissions.
Previous examples of the US ordering the divestment of a company after the acquirer did not file for CFIUS review include China National Aero-Technology Import and Export Corporation's acquisition of Seattle-based aircraft component maker Mamco in 1990, Ralls Corporation's divestment of four wind farms in Oregon in 2012, and Ironshore's sale of Wright & Co, a provider of professional liability coverage to US government employees such as law enforcement personnel and national security officials, to Starr Companies in 2016.
Kunlun acquired a majority stake in Grindr in 2016 for $93m. It bought out the remainder of the company in 2018.
Grindr's founder and CEO, Joel Simkhai, stepped down in 2018 after Kunlun bought the remaining stake in the company.
Kunlun's control of Grindr has fuelled concerns among privacy advocates in the US. Senators Edward Markey and Richard Blumenthal sent a letter to Grindr in 2018 demanding answers with regard to how the app would protect users' privacy under its Chinese owner.
Kunlun is one of China's largest mobile gaming companies. It was part of a buyout consortium that acquired Norwegian internet browser business Opera for $600m in 2016.
Founded in 2008 by Tsinghua University graduate Zhou Yahui, Kunlun also owns Qudian, a Chinese consumer credit provider, and Xianlai Huyu, a Chinese mobile gaming company.