The Waterloo-based Kik Interactive Inc. is officially shutting down Kik, the Canadian social media and messaging app, in order to focus all its manpower and resources on the legal battle with the U.S. Securities and Exchange Commission (SEC) revealed the company’s blog post.
In order to fully understand and comprehend Kik’s current situation, we must visit all the events that lead the app to this very point, right from when it was launched. The Kik Messenger entered the market in 2010 and quickly following its launch managed to establish a sizeable user base, which the app has managed to retain till today.
According to recent court filings during the legal battle with the SEC, the messaging service still has millions of active users. The company was reportedly valued at US$1 billion when it received a US$50 million investment from Chinese tech giant Tencent.
However, the demise of the application cannot be ignored just by taking into account these numbers; Kik struggled quite a lot when it comes to generating revenue with the app and their competition didn’t make it any easier as it was up against social media behemoths such as Facebook Messenger and WhatsApp.
Later in 2017, right around the time when a whole new world of Bitcoin, cryptocurrency and blockchain tech was being explored, Kik Interactive CEO Ted Livingston announced the launching of Kin, Kiks very own cryptocurrency, into the market. According to the company, Kin is different from other digital currencies because it is a cryptocurrency. It’s an application of the public blockchain similar to Bitcoin and it has monetary value, which means it can be bought and sold for real money.
The idea was to essentially leverage the Kik user base as sort of a launchpad for Kin so as to spur wider adoption of the digital currency. Kin was officially launched two years ago raising nearly $100 million in its ICO, one of the first held by a mainstream tech company. And that is when the trouble started following the company ultimately leading to the recently announced shutdown of the messaging.
The United States regulatory authority sued the company on the alleged grounds of unregulated sale of securities during the initial coin offering (ICO) for its cryptocurrency Kin in 2017. The SEC turned Kik’s biggest strength, its large user base, into a lawsuit; in a legal complaint earlier this year SEC called out the company.
It claimed that by linking the success of the crypto Kin with Kik’s success as a business, the company was effectively using the ICO to sell cryptocurrency as a security without proper regulatory compliance. According to a press release, Steven Peikin, co-director of the SEC’s Division of Enforcement said:
By selling $100 million in securities without registering the offers or sales, we allege that Kik deprived investors of information to which they were legally entitled, and prevented investors from making informed investment decisions
Kik, on the other hand, did not remain silent in the face of such allegations by the U.S. regulators. Back in August, the company went ahead and filed a response claiming that the SEC was misrepresenting key facts and twisting quotes of executives out of context to create a false picture. In his blog post, Livingston said:
So with the SEC working to characterize almost all cryptocurrencies as securities we made the decision to step forward and fight.
He further announced the news of the app being shut down, so they could shift their focus solely on their fight with the SEC. Livingston added that the Kik team had underestimated the lengths that the regulatory body would go to into drawing out a long and expensive process to drain their resources.
Instead of selling some of our Kin into the limited liquidity that exists today, we made the decision to focus our current resources on the few things that matter most.
The three most important takeaways from Livingston’s announcement are:
- Kik will be shutting down
- They will ration their team and reduce the headcount to an elite 19 person team
- The main focus of the company from here on out will be to convert Kin users into Kin buyers.
Livingston explained that together these changes will help the company in significantly dropping their burn rate by 85%, which will give the company enough fuel to get through the SEC trial.
He made it clear through the post that no matter what happens to Kik, Kin will not share the same fate as the messaging app and is here to stay. Livingston concluded:
Kin is a currency used by millions of people in dozens of independent apps. So, while the SEC might be able to push us around, taking on the broader Kin Ecosystem will be a much bigger fight. And the Ecosystem is close to adding a lot more firepower.