Grindr sold by Chinese owner amid US security concerns

Brief:

Chinese gaming company Beijing Kunlun Tech agreed to sell the popular LGBT dating app Grindr, a year after U.S. authorities pushed for a divestment amid national security concerns. San Vicente Acquisition, a company formed by investors in the technology, media and telecom industries, will pay about $608.5 million for Grindr, Reuters reported.
The companies still need approval for the deal from the Committee on Foreign Investment in the U.S. (CFIUS), which last year had required Kunlun to unwind its purchase of Grindr, per a filing with the Shenzhen Stock Exchange. Kunlun in 2016 bought a majority interest in Grindr for $93 million, per press reports.
One of the investors in San Vicente Acquisition is Chinese-born U.S. citizen James Lu, a former executive at Chinese search engine giant Baidu, Reuters reported, citing unnamed sources. Grindr has more than 4.5 million daily active users (DAUs), making it the world’s biggest social networking app for gay, bisexual, transgender and queer people, per its website.

Insight:

Beijing Kunlun Tech's planned divestiture of Grindr comes a year after CFIUS set a June 2020 deadline for the Chinese company to sell the popular LGBT dating app because of national security concerns. As part of that agreement, Kunlun had shut down its operations in China and said it wouldn't send any sensitive user data to the country to address security concerns. Kunlun also had agreed to keep Grindr’s headquarters in the U.S. and to put at least two U.S. citizens on its three-member board of directors, Reuters reported last year.

The sale of Grindr may indicate that CFIUS will require ByteDance to divest its interest in TikTok, the social video app that's popular with U.S. teens. ByteDance created TikTok in 2018 after buying the popular lip-sync platform Musical.ly for as much as $1 billion and rebranding it. TikTok became an international sensation as mobile users downloaded the app more than 1.65 billion times, and major brands started to develop ad campaigns for the platform to connect with younger audiences.

That popularity has invited greater scrutiny among U.S. authorities and lawmakers who have expressed concerns about the information that TikTok gathers about users. Several branches of government, including the U.S. military, have banned the app because of security concerns. TikTok has said that the Chinese government hasn't demanded that the company share information about its users, and that it keeps data on servers outside the country.

The company also is taking steps to grow its operations in the U.S., which has the world's biggest advertising market at $263 billion, per GroupM data cited by Digiday. TikTok this year started the search for a U.S.-based CEO to handle non-technical functions such as advertising and operations.