Momo's founder bashed ahead of US IPO filing

By Wu Jin: 0 Comment(s)Print E-mail China.org.cn, December 12, 2014

Yan Tang (C, front), founder and chief executive officer of China's mobile social networking platform Momo Inc. attends the ceremony of ringing the opening bell at the NASDAQ in New York, the United States, on Dec 11, 2014. China's mobile social networking platform Momo Inc. listed its shares Thursday on the NASDAQ global select market. The company announced that its initial public offering of 16 million American depositary shares (ADSs) was priced at $13.5 per ADS for a total offering size of $216 million dollars. [Photo/Xinhua]

Immomo.com (widely known as Momo), a Chinese social media service, went forward with filing for an initial public offering in the United States on Thursday in spite of a vitriolic statement issued on Wednesday by NetEase, one of China's major web portals, against Momo's founder Tang Yan.

Momo is expected to net US$216 million on its first day of trading on the NASDAQ exchange, and Tang has said he plans to open Momo offices in the U.S. to expand the company's business.

However, just a day ahead of the IPO, NetEase issued a statement accusing Tang, the former editor-in-chief of NetEase, of dereliction of duty and of misuse of company resources to benefit an advertising firm where his wife was working while he was employed at NetEase.

The statement alleged that Tang violated his contracts and commitments with NetEase by utilizing the information and technological resources provided by the website to establish his own company -- Momo -- in July, 2011, when he still worked at NetEase.

It also added that Tang had been detained by police for 10 days over a non-business-related matter in 2007.

The statement was published two days after Momo had submitted its prospectus supplement to the U.S. Securities and Exchange Commission.

NetEase explained on its website that the announcement was directed against Tang, not against his company. The website also explained that it sent a legal letter to Tang on Nov. 21, 2014 to demand that he apologize for his inappropriate actions while with his former employer.

According to Beijing Morning Post, both NetEase and Momo declined to comment on the issue.

"NetEase investigated Tang in regard to his suspected attempts to channel resources to his wife's company, but no evidence has yet been found to support those suppositions," said Li Yong, Tang's former superior. "NetEase is unusually cruel in regard to the way it treats its employees and former employees," Li added.

Momo, which allows users to establish personal social networks by searching for adjacent strangers based on people's current locations via their mobile devices, attracted 180.3 million users by Sept. 30, 2014. The number of active users of the service reached 60.2 million in a single month. The social media service launched a business model in the second half of last year and netted US$ 3.1 million. In the first half of this year, the revenues soared to US$13.9 million.

The rise of Momo's popularity is considered a great success in the social media sector that has been dominated by the WeChat service developed by Tencent. The previous rivals of WeChat include YiChat, a social media app developed by NetEase. The number of YiChat users hit 100 million this July according to Yuan Foyu, marketing manager at NetEase.

Judging from the timing and content of NetEase's denouncement of Tang , the company aims to affect Momo's U.S. IPO. The personal and professional ethics and leadership styles of company founders are major concerns in IPOs there, an anonymous industrial insider said in an interview with Beijing Morning Post.

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