Red-chip Citic, the biggest conglomerate in China, and private equity firm SB China Venture Capital have entered the virtual reality business through their combined HK$200 million strategic investment in Hong Kong-based Digital Domain Holdings. In a filing with the Hong Kong stock exchange, Digital Domain said Citic and SB China Venture Capital agreed last Friday to subscribe to a total 363.64 million of its shares at 55 Hong Kong cents per share, which represented a 9.84 per cent discount to the closing price of 61 Hong Kong cents on Friday. The transaction yielded net proceeds of HK$199.85 million, which Digital Domain said it will use for its media entertainment business and general working capital. “As Digital Domain’s footprint broadens, we are always looking for opportunities to grow our media and entertainment business and further penetrate the virtual reality market,” company chief executive Daniel Seah Ang said in a statement on Monday. “The introduction of strategic investors into the company not only represents their confidence in Digital Domain’s solid business foundation, sound strategy and robust potential, but also offers Digital Domain additional funds, increasing our capital base for future business development.” The company owns and operates the world’s largest independent visual effects studio, Digital Domain 3.0, with headquarters in the United States. Canadian subsidiaries Immersive Ventures and IM360 Entertainment are involved in creating original virtual reality content. The introduction of strategic investors... offers Digital Domain additional funds, increasing our capital base for future business development Daniel Seah Ang, Digital Domain CEO Ahead of the opening of the market on Monday, Digital Domain requested the stock exchange to halt trading of its shares pending the announcement of the new investment. The shares subscribed to by Citic and SB China Venture represent about 3.06 per cent of the existing issued share capital of Digital Domain. That deal followed last Friday’s acquisition of HK$190.51 million in Digital Domain convertible notes held by Harmony Energy. Citic and SB China Venture each bought HK$84 million of those notes, while Zheng Hao Investments purchased HK$22.51 million. Based on their share subscription deals with Digital Domain, Citic and SB China Venture agreed to the extension of the maturity date of the convertible notes by no more than five years. Pu Jian, a vice-president and executive director at Citic, said the virtual reality content creation expertise of Digital Domain “make it a good partner to tap the worldwide virtual reality market”. Sister company Citic Guoan, which is owned by state-owned parent Citic Group Corp, had in July bought a US$20 million stake in NextVR, a US-based developer of live virtual-reality broadcast technology. Alan Song , the managing partner at SB China Venture, described Digital Domain as “a proven leader in the global entertainment industry with Hollywood-calibre virtual reality technology and talent”. “We see immense growth potential in the company,” he said. Established in 2000, SB China Venture was an early investor in Alibaba Group and its Taobao online retail operations, Chinese data centre operator GDS and Focus Media. New York-traded Alibaba is the owner of the South China Morning Post . According to research firm IDC, the global market for virtual and augmented reality hardware, software and services is predicted to reach US$162 billion by 2020. In July, Seah said Digital Domain was pursuing more virtual reality content partnerships in China to add to its recent alliances with Alibaba-backed online video service Youku Tudou and diversified internet company LeEco.