Waterloo-based Kik Interactive Inc. is shutting down its signature chat app and laying off most of its staff in order to focus on a legal battle with the U.S. Securities and Exchange Commission, the company’s chief executive officer said in a blog post Monday.
Ted Livingston said he was reducing the number of employees from more than 100 to 19.
The U.S. regulator has sued the company, alleging that it conducted an unregulated sale of securities when it raised around US$100 million in 2017 through an initial coin offering for its nascent cryptocurrency, Kin.
“We are all in. And despite these hard decisions my confidence in Kin only continues to grow,” Livingston said in his post. “Together we will show the power of the Kin Ecosystem. Together we will get millions of people to buy Kin to use it. And together we will build a new economy that offers equal opportunity to billions of people. Together we will win.”
Kik Messenger launched in 2010 and quickly established a sizeable user base, and according to recent court filings the 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, Kik struggled to generate revenue with the app, which competed with larger rivals such as Facebook Messenger and WhatsApp. In 2017, Livingston announced a plan to launch the Kin, and essentially use the Kik user base as the launchpad to spur widespread adoption of the digital currency.
In a legal complaint earlier this year, the SEC alleged that by tying the success of the cryptocurrency to Kik’s business success, the company was effectively using the initial coin offering to sell cryptocurrency as a security without proper regulatory compliance.
In August, the company filed a blistering response, alleging that the SEC was misrepresenting key facts and taking quotes from executives out of context to create a false picture.
On Monday, Livingston again took aim at the SEC, saying that the legal fight was a major factor in the decision to shut down the Kik Messenger app.
“So with the SEC working to characterize almost all cryptocurrencies as securities we made the decision to step forward and fight,” he said.
“While we are ready to take on the SEC in court, we underestimated the tactics they would employ. How they would take our quotes out of context to manipulate the public to view us as bad actors. How they would pressure exchanges not to list Kin. And how they would draw out a long and expensive process to drain our resources.”
By shutting down the app and cutting the workforce back to “an elite 19 person team” Livingston said the company can cut its “burn rate” — the rate at which it spends money in excess of income — by 85 per cent, which will give it enough money to continue the legal fight.
Shutting down the messenger app dramatically changes the picture for Kik and Kin, but Livingston said he intends to keep building the Kin cryptocurrency and working with third-party developers to create more ways to use it.
He said that Kin currently has more than 2 million “monthly active earners” and 600,000 “monthly active spenders.”
“Going forward our 19 person team will be focused on one goal: getting millions of people to buy Kin to use it,” Livingston wrote.