Meituan revealed its plans to fully acquire Light Years Beyond for $233.7 mln in cash in a filing made public on Thursday.
Meituan revealed its plans to fully acquire Light Years Beyond for $233.7 million in cash in a filing made public on Thursday. In addition, it will assume the startup’s $50.66 million in debt.
Soon after Wang Huiwen’s resignation from all of his corporate positions at the world’s largest food delivery company, Meituan, was announced, the company announced his acquisition.
Wang was reportedly diagnosed with depression, according to a widely read blog post that claimed to have knowledge of the situation. This diagnosis sparked a conversation about the mental health of entrepreneurs in China’s tech community.
Meituan will pay the AI startup’s investors as part of the agreement. Among them are $5 million to Qimai, which Wang Xing, the current CEO of Meituan, controls, $28 million to HongShan, which was formerly known as Sequoia China before the parent company underwent a recent reorganisation, and $201 million to other investors. These transactions together roughly equal the cash payment of $234 million.
Wang initially stated in a series of job postings on the social media site Jike, which is well-liked in the Chinese tech community, that he intended to personally invest $50 million in Light Years Beyond.
The startup may have received the founder’s funding in the form of a convertible note, a type of debt that can be converted into equity. If so, the company’s $50.66 million in debt would be made up of this type of debt. That brings the total purchase price of the deal down to about $284 million.
Light Years Beyond had about $285 million in net cash as of June 29 according to the filing. That implies that Meituan is effectively getting Light Years Beyond for nothing.
Although the filing claims that the agreement enables Meituan to “obtain” AI talent and technology, it’s possible that without Wang’s inspiring vision, the AI specialists might not have been as eager to work for Meituan, which specialises in on-demand neighbourhood services.
The startup’s restricted use of the funds it had raised suggests that its development had slowed recently. Large language model development is known to be an expensive endeavour, particularly in light of the skyrocketing costs of AI chips following the U.S. ban on the export of Nvidia’s cutting-edge semiconductors to China.
According to one of Wang’s Jike posts, Light Years Beyond was valued at $200 million at launch despite having no product. It demonstrates investors’ faith in Wang’s product innovation and their eagerness to seize the opportunity presented by OpenAI for China. Its journey may have been prematurely ended.