Hong Kong-listed software company Meitu Inc. is expected to suffer a US$17.3 million impairment loss on its investments in Bitcoin, according to an announcement.
Meitu, known for a Photoshop filter app, wrote that a US$17.3 million drop in the price of Bitcoin was expected to be recognized as impairment loss in its interim results. Meitu gained US$14.7 million on its Ether investments, but that will not be recognized as a revaluation gain because the company regards acquired cryptocurrencies as intangible assets and adopts a cost model for measurement, in compliance with related standards.
Meitu acquired a total of 31,000 ETH and about 941 BTC in March and April, valued collectively at US$100 million at that time. Currently, the fair values of its acquired ETH and BTC are approximately US$65.2 million and US$32.2 million, respectively, a 2.6% drop in total value.
Meitu wrote in its announcement that the impairment loss would not impact its cash flow or operations. It said it has no plans to sell or acquire more cryptos in the near future, as the board reiterated its view that the blockchain industry is still in the early stages of its development and that “cryptocurrencies have ample room for appreciation in value over the long term.”
Based in the Chinese city of Xiamen, Meitu is the only Hong Kong-listed major Chinese company to invest directly in cryptocurrencies, like western companies such as Business intelligence software company MicroStrategy and electric-car maker Tesla. Other formerly non-crypto Chinese companies such as gaming operator The9 and lottery company 500.com have pivoted to the crypto mining industry instead.
“Bitcoin’s recent mass adoption was primarily fueled by institutional and corporate buyers … Their participation paved the way for large-scale corporations to follow,” said Yulong Liu, head of global partnerships at Babel Finance.
“While I do see this trend continuing, it may this time do so at a slower pace. The fundamentals of Bitcoin’s value have not changed and remain strong. Among the reasons for this is that Bitcoin has been under regulatory pressure because of renewed [environment, social and governance] and [anti-money laundering] requirements. But despite the hiccups, the long-term future still looks bright for a unique asset class like Bitcoin.” Liu told Forkast.News.
Meitu tried to pivot to Blockchain and cryptocurrencies three years ago. In January 2018, it published its first blockchain white paper on building a blockchain-based ecosystem, including a “Meitu Intelligent Passport,” a decentralized intelligent identification file system based on facial recognition and blockchain technology.
Benefiting from the Bitcoin bull run this year, Meitu’s stock price surged to as much as HK$4.11 on February 17, its highest since March 2019. Meitu’s stock price has been in decline since April, and closed today at HK$1.65.