Tiktok

The potential IPO of Tiktok’s parent company

Tiktok might come off as a shallow application where only gen-Z people do silly dances and it often gets a lot of hate but the success of its parent company ByteDance is undeniable: the Chinese startup is today the most valuable private company on earth. The unstoppable success of the company obviously raises the question of when ByteDance will go public. Although ByteDance’s IPO is hands down one of the the most anticipated IPOs today, it is unclear when exactly it will be listed on a stock exchange and this process goes through turbulent times.

A big tech IPO…

Tiktok’s owner ByteDance is a privately held company notably by big investors such as Tiger Global Management, Sequoia Capital, Susquehanna International Group etc… The Chinese startup is considered the most valuable private company today with skyrocketing revenues thanks to ad-based apps such as Tiktok which has 689 million monthly users and its Chinese counterpart Douyin.

The valuation of ByteDance was at 400 billion US dollars on private markets in early April.

Everyone has been wondering for a long time when this IPO will take place. It would make sense from ByteDance’s perspective to go public because of their need to raise new capital and be able to carry their business worldwide. From the investors’ standpoint, the firm’s success, business model and profitability are making it more and more attractive, which explains high levels of anticipation for this IPO. When the company hired former Xiaomi executive Shou Zi Chew not long ago, this was seen as a sign for an upcoming IPO by many people. The markets even reacted to this IPO expectation and the company’s valuation in private trades quickly went up.

It is clearly among the most anticipated IPOs of recent years since it would be one of the biggest tech IPOs but somehow the IPO is still not happening yet.

…which it is not happening

ByteDance announced last month that they did not have any intentions to go public yet and there were lots of false rumors concerning that even though the general feeling was that it was going to happen.

There are a few reasons that could explain their decision to not go public yet. First and foremost, according to South China Morning Post’s sources, the company has a hard time to come up with a business structure that could satisfy the regulatory requirements of both China and the US. It is indeed difficult for the company to separate Douyin’s China operations from Tiktok’s global operations since they use the same algorithm.

The company’s different stakeholders’ divergent interests are another aspect that makes the IPO process difficult to handle.

Lastly the tensions between the US and China are not helping the IPO to become a reality: the geopolitical climate is not adequate at the moment since American investors would be heavily involved in the listing process and without them the IPO could be a failure.

Timing is crucial when it comes to IPOs and could be a make or break in its success. The Chinese company will certainly go public one day but they are clearly waiting for the right moment to arrive.

The latest news according to Reuters is that ByteDance has launched share buyback for current and former employees – after announcing they have no plans for a public listing – and some of the employees have expressed their frustration at not being able to sell their shares in an IPO.

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Sinan Güven
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