Soulgate, a Tencent-backed social networking platform based in Shanghai, has filed to raise up to $100 million in an initial public offering in the US even as it continues to burn money since 2019, its filing with the Securities and Exchange Commission showed.
The company’s prospectus is highly redacted and the amount specified is a placeholder amount that is likely to change. It plans to list on the Nasdaq under the symbol SSR.
Founded in 2016, Soulgate is an algorithm-driven online social playground in China, where people can create brand new identities online to freely share, explore, and connect with other users.
The app offers value-added services such as premium memberships, virtual gifts, and voice chats.
“Soul is a virtual social playground, where people can live in the moment, express themselves, and draw inspiration from each other’s creativity,” the company said.
In March 2021, the company averaged 9.1 million daily active users, a 94% increase over the prior-year period.
Chinese technology giant Tencent is Soulgate’s largest shareholder, owning 49.9% of the company’s issued and outstanding ordinary shares. Soulgate Holding’s management owns 33.2%.
Despite its growing popularity, the company continues to burn money to acquire new users.
Soulgate reported revenue of 498 million yuan ($76.3 million) in 2020, up 604.3% from a year earlier. In the first three months of this year, the company said its revenues increased by 259.8% to $36.4 million from the same period last year.
However, it recorded a net loss of 488.1 million yuan (US$74.8 million) in 2020, compared to a net loss of 299.5 million yuan in 2019. In the first quarter of 2021, Soulgate recorded net loss of 382.5 million yuan ($58.4 million).
Soulgate, which primarily generates revenues from value-added services such as virtual items and membership subscriptions on the Soul app, seeks to tap into the massive mobile internet user population in China to further grow the business.
According to the iResearch Report, China has a massive mobile internet user population of 986 million as of December 31, 2020, amid the intensified transformation of China’s digital economy and the continuous development of mobile technologies such as 5G telecommunications.
Mobile social networking has become a crucial part of China’s mobile internet users’ daily lives, with a penetration of 90.3% in 2020, according to the iResearch Report. The size China’s mobile social networking market reached 116.2 billion yuan in 2020 and is expected to grow at a CAGR of 18.9% from 2020 to 2024, to reach 232.2 billion yuan in 2024.