ByteDance has been valued at $250 billion in private trades after TikTok exploded in popularity this year, but is now the right time to go public?
In the last few weeks, ByteDance’s value has surged as private investor confidence soars. According to reports, ByteDance founder Zhang Yiming is now considering going public via an initial public offering (IPO).
What is ByteDance?
ByteDance is a technology company based in Beijing, China but is legally domiciled in the Cayman Islands. The company operates a number of different content platforms that educate and entertain users.
The video-sharing app has been the subject of many debates after former President Donald Trump tried to ban it in the U.S. following concerns of privacy breaches.
Is ByteDance going public?
ByteDance’s hiring of Chew Shou Zi as its Chief Financial Officer has fueled IPO rumors as he was the one to oversee Xiaomi Corp’s market debut. This hire has given investors confidence in the company as they know ByteDance is going to have a seasoned CFO.
Even though Zhang has been exploring taking just segments of the business public, like Douyin in Hong Kong, it’s now looking likely that he will list the entire company. Investors are very keen on investing in Chinese tech IPOs lately, as was made evident by Kuaishou Technology’s market debut last month. The company’s stock more than doubled from its IPO price, pushing its valuation up to $140 billion. This event will have encouraged the TikTok parent company to consider listing, especially after hearing that some private investors are demanding the equivalent of a $350 billion market cap in order to sell their ByteDance stock.
ByteDance has been busy with acquisitions lately, last month snapping up major mobile gaming studio Moonton for $4 billion. This deal further proved its ambitions in moving into the video gaming industry and will help it rival Chinese-owned Tencent with this mission.
Would ByteDance be a good investment?
If we look at ByteDance’s financials, the company looks like it would be a good investment. The social networking company more than doubled its revenue to around $35 billion in 2020 and grew its operating profit to around $7 billion from less than $4 billion the previous year.
However, we have to briefly look at the bear case for this company too. ByteDance may still be confronted with regulatory uncertainty from the U.S.. The government has tried to force ByteDance to sell to a U.S.-owned company, such as Oracle or Walmart, to ensure the privacy of its users. In addition, Beijing regulators have also recently undertaken efforts to curb China’s influential tech giants. These problems might represent hurdles for the company in the future which may put a certain amount of risk behind the company. If ByteDance can overcome these challenges, and continue becoming the biggest social app in the world, this should be a very popular market debut.
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