The strategic divestment of cryptocurrency assets has yielded substantial financial returns for Meitu, a company originally renowned for its photo-editing applications. In a recent announcement, the company confirmed the complete sale of its digital currency holdings, realizing a notable profit that underscores a successful, albeit unconventional, investment venture.
A Strategic Move into Digital Assets
In 2021, Meitu made headlines by becoming the first publicly listed company on the Hong Kong Stock Exchange to allocate a portion of its reserves to cryptocurrencies. The initial investment comprised approximately 31,000 units of Ethereum (ETH) and 940 units of Bitcoin (BTC), acquired for a total cash consideration of around $50.5 million and $49.5 million, respectively.
This move was championed by Meitu's Chairman, Cai Wensheng, who emphasized the pioneering nature of the decision. At the time, it represented a bold step into an emerging asset class for a mainstream corporation.
Navigating Market Volatility
The journey was not without its challenges. The cryptocurrency market experienced significant turbulence in 2022, with prices for major digital assets like Bitcoin and Ethereum plummeting. Meitu's interim report for that year reflected this downturn, showing a fair value decrease of approximately RMB 112 million for its holdings.
The company recorded substantial impairment losses, with Ethereum and Bitcoin positions declining by roughly RMB 86.6 million and RMB 198.2 million, respectively. It wasn't until the first half of 2023 that the market began to recover, allowing Meitu to reverse about RMB 185 million of these losses.
Capitalizing on a Market Upswing
The latter part of 2024 witnessed a dramatic surge in cryptocurrency values, driven by shifting regulatory expectations and broader market adoption. Bitcoin's price ascended rapidly, breaking through multiple resistance levels to approach the $100,000 mark.
Seizing this opportune moment, Meitu executed the sale of its entire cryptocurrency portfolio. The Ethereum and Bitcoin holdings were liquidated for total cash considerations of approximately $100 million and $80 million, respectively. This transaction resulted in a net profit of about RMB 571 million (roughly $80 million).
The divestment timing proved exceptionally favorable. Merely one day after the sale was finalized, Bitcoin's price surged past $103,000, registering a single-day gain of over 5%.
Allocation of Profits and Core Business Focus
Following the successful sale, Meitu's Board of Directors announced a plan to allocate the net proceeds strategically. Approximately 80% of the profits are designated for a special dividend distribution to shareholders. The remaining funds will be channeled into the company's general operating capital, specifically to fuel the expansion of its core imaging and design product suite, which operates primarily on a paid subscription model.
This core segment has demonstrated robust growth, with revenues reaching RMB 1.33 billion in 2023—a year-on-year increase of 52.8%. The positive trajectory continued into the first half of 2024, with the segment generating RMB 930 million in revenue, accounting for 57.4% of total income and growing 54.5% compared to the previous year.
Investing in AI and Future Growth
To support this expansion and maintain technological leadership, Meitu has significantly increased its investment in research and development. In H1 2024, R&D expenditures rose to RMB 425 million, a 44.52% increase year-over-year. A major focus of this investment is artificial intelligence, with the company reporting that around 83% of the billions of images and videos processed daily by its users leverage AI-powered features.
The company's user metrics are equally strong. As of June 30, 2024, Meitu's paying subscriber base exceeded 10.81 million, a historical high that represents a penetration rate of approximately 4.2%. Monthly active users grew to 258 million, a 4.3% increase.
Regarding future technology strategy, Meitu's leadership has adopted a pragmatic approach. The company does not intend to engage in a large-scale "AI model arms race" with tech giants. Instead, it focuses on developing applied AI that enhances its core products, believing the market for applications will be an order of magnitude larger than that for the underlying models themselves. For those looking to understand the tools driving this strategy, you can explore advanced digital asset strategies.
The market responded positively to these strategic developments. Upon news of the cryptocurrency sale, Meitu's share price rose 6.29%, closing at HK$3.04, which elevated the company's total market capitalization to approximately HK$13.79 billion.
Frequently Asked Questions
Why did Meitu invest in cryptocurrency initially?
Meitu sought to diversify its corporate treasury holdings and was an early adopter among publicly listed companies seeing potential long-term value in major digital assets like Bitcoin and Ethereum as a store of value.
How did the 2022 market crash affect Meitu's investment?
The company faced significant paper losses during the 2022 crypto winter, recording substantial impairment losses on its holdings. However, it held the assets through the downturn, allowing it to realize gains when the market recovered.
What will Meitu do with the profits from the sale?
The majority (80%) of the net profit will be distributed to shareholders as a special dividend. The remaining funds will be reinvested into the company's core subscription-based imaging and design business to fuel its growth.
Is Meitu still involved in the cryptocurrency market?
According to its official announcement, the company has sold all of its Ethereum and Bitcoin holdings and no longer holds any cryptocurrency, signaling a full exit from direct digital asset investments for now.
How is AI contributing to Meitu's core business?
AI is fundamental to its products. Over 80% of the content processed on its platforms uses AI features, enhancing user experience and driving subscription value. The company is investing heavily in R&D to integrate AI further without engaging in foundational model development.
What is the growth outlook for Meitu's main business?
The core imaging and design segment is experiencing rapid growth, with revenue increasing over 50% year-on-year. Its paid subscriber base is at an all-time high, indicating strong market demand for its premium offerings. To stay updated on leveraging such growth trends, you can get insights on market analysis tools.