A young couple have fun playing a video game at home. Photo: iStock

Struggling Meitu, the tech firm based in Xiamen, has reinvented itself and appears to have pinned its hopes on video games – virgin turf for the company, which went public on the Hong Kong Stock Exchange in December 2016.

Yesterday the developer of selfie touch-up apps and Leyou Technology Holdings, which develops online multiplayer games, entered into a non-binding agreement via its subsidiary Dreamscape Horizon, a video game developer in North America.

The deal may involve swapping up to 20% of Meitu shares in exchange for 30% in Leyou’s Dreamscape.

Although details of the deal are not fully known, a 20% stake in Meitu, whose shares have fallen nearly 70% from its initial public offering, was worth nearly HK$2.13 billion (US$273 million).

The finances of Dreamscape Horizon are not clear either but its Canadian subsidiary develops Warframe, one of the 100 top-selling games of 2018 on Steam, the largest digital marketplace for PC games.

It is not immediately clear how Meitu will have synergy with the North American business of video games, known to be much more popular with men than women.

But the new venture, which attempts to rediscover the profitability path after two consecutive years of losses, follows an earlier deal to trim down losses at the beauty app developer.

In November, Meitu signed a 30-year exclusive cooperation deal with Xiaomi that effectively sold its hardware division to the smartphone manufacturer.

Both sides will work towards a Meitu branded phone made by Xiaomi. Meitu will be entitled to up to 10% of the gross profit of the new product, along with a fixed fee and a minimum guaranteed amount of US$10 million a year.

Last August, Meitu said it had adopted a new strategy to transform its flagship photo-editing app into a social media platform like Instagram, which is not available in China.

Only time will tell if Meitu can successfully to find a profitable core business.

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