As the Trump administration cracks down on Chinese investment in corporate America, one health tech start-up is facing an abnormal situation: PatientsLikeMe is being forced to find a buyer after the U.S. government has ordered its majority owner, a Chinese firm, to divest its stake.
PatientsLikeMe provides an online service that helps patients find people with similar health conditions. In 2017, the start-up raised $100 million and sold a majority stake to Shenzhen-based iCarbonX, which was started by genomic scientist Jun Wang and is backed by Chinese giant Tencent.
That deal has recently drawn the attention of the Committee on Foreign Investment in the United States (CFIUS), which is aggressively cracking down on Chinese investments in American companies, particularly when national security and trade secrets are at risk.
CFIUS is now forcing a divestiture by iCarbonX, meaning PatientsLikeMe has to find a buyer, according to several people with knowledge of the matter. PatientsLikeMe started receiving notifications from CFIUS late last year, said the people, who asked not to be named because the details are confidential.
The move could have dire implications for the start-up community, as Chinese investors are scared away or forbidden from participating in deals that can help emerging businesses.
As a result of the Trump administration's clampdown, Chinese direct investment in the U.S. has plummeted 90 percent in two years, from $46 billion in 2016 to $4.8 billion in 2018, according to data from research firm Rhodium Group. Another $20 billion in divestitures is still pending, says Rhodium.