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PARIS. According to documents reviewed by POLITICO, French search engine Qwant is seeking 8 million euros from Chinese telecommunications giant Huawei to stay afloat.
On May 18, Qwant CEO Jean-Claude Ginozzi asked shareholders to accept € 8 million in convertible bond funding from Hubble, Huawei’s Hong Kong-based venture capital arm, according to the documents.
The move comes as Qwant, which is funded in part by French government money, is looking to bolster its finances. Launched in 2013 and soon backed by the President of France. Emmanuel Macron and Vice President of the European Commission Margrethe VestagerQwant was designed to compete with US search giant Google and support the EU’s tech sector amid broader efforts to rid the continent of dependence on foreign companies.
The financial backing could mean the Chinese player gains a say in the company’s operations, while several governments accuse Huawei of espionage and squeeze it out of key markets.
Despite geopolitical tensions surrounding Huawei, French state bank Caisse des Dépôts – a shareholder of Qwant – voted in favor of the financial transaction, according to one of the participants in the May 18 meeting.
Caisse des Dépôts declined to comment. The person involved in the case said the bank was confident that Huawei did not have the authority to convert its bonds as it wanted.
This type of financial transaction, quite common in the startup world, aims to bail out Qwant after years of losses with a three-year loan at 4.5% per annum. The company lost 13 million euros in 2020, €23 million in 2019 and € 11.2 million in 2018 for revenue equal to, respectively, for 7.5 million euros, 5.8 million euros as well as 3 million euros…
But this mechanism also allows investors like Huawei to turn their bonds into stocks on strict terms. As a shareholder, the company has the potential to gain visibility or influence the company’s strategy.
Among other conditions, the company must obtain “administrative approvals” before requesting a conversion after two years and becoming a shareholder with only “5 to 7.5 percent” of Qwant, the document says. The parties declined to comment on who would issue such permission.
A Qwant spokesman said the bond financing was a continuation of the existing partnership with Huawei, which does not mean the Chinese firm will acquire a stake.
“This is an investment through a bond. This is not an equity entry into Qwant. It is a means of financing our expansion, and, not least, with the participation of an important global player who recognizes the reliability of our technology and the reality of our project. “
“Specifically, with its bond investment, Huawei is helping Qwant develop and expand at a European level for all brand smartphones that will be launched in France, Germany and Italy,” the spokesperson added.
Huawei did not immediately respond to a request for comment. Axel Springer representative who also investor in Qwant through Axel Springer Digital Ventures, declined to comment. Axel Springer is a co-owner of POLITICO Europe.
Huawei’s partnership with Qwant began in March 2020 when the two companies announced they will collaborate on mobile devices, with Qwant installed by default on Huawei P40 smartphones in some European countries. Huawei was deprived of Google products due to the conflict with the American administration.
Several insiders have told POLITICO that the partnership between Qwant and Huawei has been under development since November 2018.
The financial details of the deal were not disclosed, but they involve splitting the ad revenue that P40 users will receive on the Qwant search engine.
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