China Selfie App Giant Disenchants Investors as Losses Continue

(Bloomberg) -- The slide in Meitu Inc.’s shares makes for grim viewing.

The company behind a photo-retouching app used by hundreds of millions tumbled 13 percent Wednesday, the most in five months. That came after Meitu posted a first-half loss of 127.4 million yuan ($19 million) and said it would “de-emphasize net profit generation” until it transformed into a social media platform. The shares fell 19 percent at one point following the results, the most on record.

Wednesday’s slide means Meitu, which listed in Hong Kong in 2016, is 77 percent below its peak in March 2017. The Xiamen-based company is now trading at less than half of its offering price, weighed by investor concerns ranging from high valuations to intense competition. Meitu lags many tech peers and is one of the worst performers on the Hang Seng Composite Information Technology Index.

“Its attempts to diversify with live streaming, branded cell phones and accessories just have not taken off,” said Ding Daoshi, director of research at Beijing-based Internet consultancy Sootoo. Shrinking user numbers have devastating effects on tech firms and will weigh on shares for months, he added.

Meitu said monthly active years totaled 350 million as of the end of June, down 16 percent from 416 million at the end of last year. Of that total, 243 million were in mainland China, a drop of 20 percent from Dec. 31. The company said the numbers were pressured by one-off factors such as a download suspension from various app stores and increasing competition.

--With assistance from David Watkins.

To contact Bloomberg News staff for this story: April Ma in Beijing at ama112@bloomberg.net

To contact the editors responsible for this story: Will Davies at wdavies13@bloomberg.net, Kana Nishizawa

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