A Reported Takeover Bid Values TikTok At $50 Billion

TOPLINE

As TikTok faces mounting security and privacy concerns and a possible ban in the U.S., some investors of its China-based parent company ByteDance are seeking to take over the short-form video social media app and have valued it at about $50 billion, according to a Reuters report.

French influencers Marie-Victoire Tiangue and Raphaël Curron create content on Tik Tok at the the … [+] French House Paris.

AFP via Getty Images

KEY FACTS

ByteDance, which is privately owned, has received a proposal from some of its investors, including Sequoia and General Atlantic, to transfer majority ownership of TikTok to them, sources familiar with the matter told Reuters.

Companies and investment firms have also approached ByteDance about acquiring TikTok, which crossed the 2 billion downloads mark in April, according to Sensor Tower, a data firm that evaluates mobile apps.

The bid values TikTok at 50 times its projected 2020 revenue of $1 billion, giving it a higher valuation than competitor Snap which is valued at $33 billion, 15 times its projected 2020 revenue, according to data provider Refinitiv.

ByteDance executives have reportedly valued TikTok at more than $50 billion so it is unclear if Zhang Yiming, the billionaire founder of ByteDance and TikTok, will take the offer.

TikTok expects to bring in $6 billion in revenue in 2021 as it grows and makes more money from advertising, sources said, which would give it a whopping $300 billion valuation using the current 50 times projected revenue model.

ByteDance is reportedly considering divesting TikTok’s U.S. operations in an apparent workaround to the potential ban in the U.S. regarding security and privacy concerns — TikTok has repeatedly denied claims that it shares its users’ data with the Chinese government and has told CNBC that protecting the privacy of its users’ data is a “critical priority.”

key background

White House trade advisor Peter Navarro told Fox News last week that President Donald Trump will take “strong action” against TikTok and other Chinese apps, claiming that all data collected from Americans by TikTok, “goes right to servers in China, right to the Chinese military, the Chinese Communist Party, and the agencies that want to steal our intellectual property.” Noting India’s recent ban on TikTok, WeChat and other popular Chinese apps, Navarro suggested that similar action could be taken without mentioning a ban. Secretary of State Mike Pompeo told Fox News in early July that the U.S. is “certainly looking at” restricting TikTok and other Chinese social media apps. Pompeo’s remarks follow months of concern from Republican and Democratic senators who consider TikTok to be a threat to U.S. national security. TikTok seems to be distancing itself from China — in May the company hired an American CEO and in July, it pledged to hire 10,000 U.S. employees during the next three years. Its parent company ByteDance is reportedly considering moving its headquarters out of China or hiring a new management board. About 70% of ByteDance’s equity capital from outside investors has come from the U.S., a source told Reuters.

what to watch

Watch to see if ByteDance sells TikTok or divests. There is no certainty that ByteDance will agree to any deal, sources told Reuters.

big number

$16.2 billion. That is Yiming’s net worth, based partially on his reported 24% ownership in ByteDance, according to Forbes estimates. ByteDance was valued at as much as $140 billion earlier this year when shareholder Cheetah Mobile sold a small stake in a private deal, one of the sources told Reuters.

news peg

TikTok faces another challenge — Facebook-owned Instagram is launching its short-term video functionality Reels in early August. The move is widely viewed as Facebook’s attempt to compete with TikTok and the social media giant is making lucrative offers to TikTok influencers with millions of followers to lure them over to Reels, according to a Wall Street Journal report.