Tencent Music executive accused of defrauding early investor

HONG KONG • A Chinese investor accused the co-president of Tencent Music Entertainment Group, which could fetch as much as US$1.23 billion (RM5.13 billion) in an initial public offering (IPO) this month, of using lies and threats to get him to sell his stake in a company that eventually became part of China’s largest music-streaming service.

The investor made the claim in an arbitration proceeding in China against the company, co-president Guomin Xie and others, and he repeated it last Wednesday in a US lawsuit seeking documents from four underwriters of Tencent Music’s IPO. The online-music arm of Tencent Holdings Ltd, China’s largest social-media company, is planning to list in the US on Dec 12.

In the arbitration, Hanwei Guo claims he invested US$26 million in an entity called Ocean Music in 2012 after repeated invitations from Xie, who he said promised the company would be profitable within two years and would go public in the US within three.

While the company received investments totalling US$100 million, Guo said in his filing in federal court in New York, he was told that the business was failing and that he should sell his stake. Xie and his associates hired someone to threaten him with government interference if he didn’t complete the sale, Guo alleges in court documents.

“Faced with threats, coercion and intimidation, and denied access to the information that would have revealed the true value of Ocean Music, Guo sold his shares”, while Xie proceeded to build the company into a “streaming giant”, according to the filings.

The arbitration is before the China International Economic and Trade Arbitration Commission. In it, Guo is seeking a return of parts of his equity stakes and compensation for the gains he might have realised, according to court documents.

“Historical financial documents and information possessed by Tencent Music’s banking advisors could be highly relevant to Guo’s claims,” Tai-Heng Cheng, an attorney for Guo, said in a statement. The suit seeks information from underwriters including Deutsche Bank AG, JPMorgan Chase & Co, Bank of America Corp and Morgan Stanley. — Bloomberg