French search firm Qwant seeks €8M Huawei bailout loan

French search firm Qwant seeks €8M Huawei bailout loan

Qwant has been held up as a digital champion by President Emmanuel Macron.

PARIS — French search engine Qwant is seeking €8 million from Chinese telecom giant Huawei in an effort to stay afloat, according to documents seen by POLITICO.

Qwant CEO Jean-Claude Ghinozzi asked shareholders on May 18 to accept €8 million in funding via convertible bonds from Hubble, Huawei’s venture capital arm based in Hong Kong, the documents show.

The move comes as Qwant, which is partly funded by French public money, aims to shore up its finances. Launched in 2013 and soon backed by French President Emmanuel Macron and European Commission Vice President Margrethe Vestager, Qwant was designed to become a rival to U.S. search giant Google and bolster the EU's tech sector amid wider efforts to wean the Continent off dependence on foreign companies.

Financial backing could mean the Chinese player gains a say over the company's operations, at a time when Huawei stands accused by several governments of spying and has been pushed out of key markets.

Despite geopolitical tensions surrounding Huawei, the French state-owned bank Caisse des Dépôts — a Qwant shareholder — voted in favor of the financial operation, according to one of the people who attended the May 18 meeting.

The Caisse des Dépôts declined to comment. A person involved in the matter said the bank had been reassured by the fact that Huawei did not have the power to convert its bonds as it wanted.

This type of financial operation, which is quite common in the startup world, aims to bail out Qwant after years of losses via a three-year loan at a 4.5 percent interest rate. The company lost €13 million in 2020, €23 million in 2019 and €11.2 million in 2018 for revenues that amount respectively for €7.5 million, €5.8 million and €3 million. 

But the mechanism also makes it possible for investors like Huawei to turn its bonds into shares under strict conditions. As a shareholder, the company could potentially gain visibility or influence on the company's strategy.

Among other conditions, the company needs to obtain “administrative authorizations,” before asking for a conversion in two years and become a shareholder owning only “between 5 and 7.5 percent” of Qwant, the document reads. The parties declined to comment on who would issue such an authorization.

A spokesperson for Qwant said the bond financing was a continuation of an existing partnership with Huawei, which did not mean the Chinese firm would take an equity stake.

"This is an investment via a bond. It is not an entry into Qwant's capital. It is a vehicle to finance our expansion, and importantly it's with a crucial global player that recognizes the solidity of our technology and the reality of our project."

"Concretely, with its bond investment, Huawei is helping Qwant to develop and gain scale on a European level for all of the brand's smartphones that will be put on the market in France, Germany and Italy," the spokesperson added.

Huawei did not immediately respond to a request for comment. A spokesperson for Axel Springer, which is also an investor in Qwant via Axel Springer Digital Ventures, declined to comment. Axel Springer is a co-owner of POLITICO Europe.

Huawei's partnership with Qwant dates back to March 2020 when the two companies announced they would cooperate on mobile devices, with Qwant being installed by default on Huawei’s P40 smartphones in some European countries. Huawei has been deprived of Google’s products because of a conflict with the American administration. 

The Qwant-Huawei partnership had been in the pipeline since November 2018, several insiders told POLITICO.

Financial details of the deal have not been disclosed, but they included sharing advertising revenue that P40 users would generate on Qwant’s search engine.

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