Tencent Music executive sued for fraud ahead of US$1.2 billion IPO
- The accusations come ahead of the much-anticipated New York IPO for the music streaming service operator, which is the biggest in China
An executive of Tencent Music Entertainment Group, the music industry spin-off of China’s biggest social network operator Tencent Holdings, faces an accusation of defrauding and coercing an early investor to sell his equity stake, ahead of the company’s planned initial public offering on Wednesday in the US.
Chinese investor Guo Hanwei claimed that Xie Guomin, co-president of Tencent Music Entertainment, “used misinformation, threats and intimidation” in 2013 to force the investor to sell his equity stake in Ocean Music, a company Xie co-founded and merged with Tencent Music to become the music streaming service today, according to a document filed with a New York district court.
Guo said he invested a total of 180 million yuan (US$26 million) in Ocean Music from 2012 to 2013 upon repeated invitation by Xie, who later – according to Guo’s account – told the investor that the company was failing and pressured Guo to sell his stakes. Guo said he sold the stakes to Xie in November 2013 for 158 million yuan.
Guo filed a motion for discovery last Wednesday in the district court in New York to assist an arbitration proceeding in China, requesting Xie and others to return his stakes and compensate him for his economic loss.
Tencent Music Entertainment declined to comment on the matter on Monday.