NEW YORK / HONG KONG (Reuters) – Some investors in TikTok parent company ByteDance, seeking to take over the popular social media app, value it at around $ 50 billion, significantly more than its peers, like Snap. Inc (SNAP.N), according to people familiar with the matter.
FILE PHOTO: Tik Tok logos are seen on smartphones in front of a ByteDance logo in this illustration taken on November 27, 2019. REUTERS / Dado Ruvic / Illustration
Beijing-based ByteDance is considering a range of options for TikTok amid pressure from the United States to relinquish control of the app, which allows users to create short videos with special effects and has become very popular with American teenagers. The app’s success has helped make ByteDance one of the few truly global Chinese conglomerates.
The Committee on Foreign Investment in the United States (CFIUS), a panel of the US government that reviews foreign buyers’ agreements for possible national security risks, has expressed concern about the security of personal data that TikTok manages under its Chinese owner, Reuters has previously reported.
The privately owned ByteDance received a proposal from some of its investors, including Sequoia and General Atlantic, to transfer the majority ownership of TikTok to them, the sources said. It has also generated acquisition interests in TikTok from other companies and investment firms, the sources said.
The investor offering values TikTok at 50 times its projected 2020 revenue of approximately $ 1 billion, according to sources. In comparison, Snap is valued at 15 times its projected revenue for 2020, at around $ 33 billion, according to data provider Refinitiv.
It is unclear whether ByteDance founder and CEO Yiming Zhang will be satisfied with the offer. ByteDance executives recently discussed valuation projections for TikTok that exceed $ 50 billion, one of the sources said.
TikTok is growing rapidly as it raises more money from advertising, and its management team hopes to reach $ 6 billion in revenue by 2021, one of the sources said. ByteDance, which owns other apps, including TikTok’s Chinese counterpart Douyin, has set a 2020 revenue target of roughly 200 billion yuan ($ 28 billion), Reuters previously reported.
ByteDance was valued at up to $ 140 billion earlier this year when one of its shareholders, Cheetah Mobile Inc (CMCM.N), sold a small stake in a private deal, one of the sources said.
If a TikTok-wide agreement cannot be reached, ByteDance is exploring divestment only of TikTok operations in the United States, one of the sources said. It is unclear how much such an agreement would be worth and what ties TikTok would maintain in the United States with its global operations.
There is no certainty that ByteDance will accept any deal, the sources said. It is moving forward with structural changes that will further distance TikTok’s American business from its global empire, the sources added. These changes could include a new holding company for TikTok and an independent board, one of the sources said, warning that a decision has not been made. The company has already operatively separated TikTok from its other applications through dedicated teams.
The sources requested anonymity because the deliberations are confidential.
ByteDance, General Atlantic and Sequoia declined to comment, while Cheetah Mobile and a CFIUS spokeswoman did not respond to requests for comment.
OBJECTIVE OF THE LAWYERS OF THE UNITED STATES
As relations between the United States and China deteriorate due to trade, Hong Kong autonomy, cyber security, and the spread of the new coronavirus, TikTok has become a critical point in the dispute between the two largest economies in the world.
Last week, the US Senate Committee on Homeland Security and Government Affairs unanimously passed a bill that would prohibit US federal employees from using TikTok on government-issued devices. It will be taken by the full Senate for a vote. The House of Representatives has already voted for a similar measure.
President Donald Trump and senior administration officials have said they are considering a broader ban on TikTok and other China-linked apps.
ByteDance acquired the Shanghai-based video app Musical.ly in a $ 1 billion deal in 2017 and relaunched it as a TikTok the following year. According to one of the sources, approximately 70% of the share capital that ByteDance has raised from outside investors comes from the United States.
Reports by Echo Wang in New York and Kane Wu and Julie Zhu in Hong Kong; Editing by Greg Roumeliotis, Leslie Adler, and Louise Heavens