Tik Tok IPO guide
Rebecca Cattlin June 14, 2021 8:31 AM
Speculation over when TikTok will IPO has been whirling around for the last couple of years, but there’s still no concrete date thanks to regulatory issues. Find out everything we know so far about the potential ByteDance app listing.
TikTok IPO: is TikTok going public?
TikTok will be going public…eventually. Its parent company ByteDance confirmed in 2020 that TikTok Global, a new US entity, will have its IPO at some point. This will be separate from ByteDance’s IPO, which is also in the pipeline.
Rumours about TikTok’s potential IPO reignited in April 2021 following a Bloomberg article that detailed the unicorn’s preparations. When the IPO does happen, TikTok will likely go public in the US, and ByteDance’s domestic assets will go public in Hong Kong. In the long run, this separation will likely prove to be a smart decision from ByteDance.
However, the TikTok IPO is on the backburner for now as ByteDance has had difficulties meeting both Chinese and US stock exchange regulations. This is due to the fact its two apps – TikTok and the Chinese counterpart Douyin – have yet to achieve operational separation, meaning the two companies share the same algorithm and much of the same technology. This has meant the US and Chinese regulators are not satisfied with the business’s structure.
The entire matter is not helped by the friction between the US and Chinese governments, which has made the Chinese government increasingly strict over the actions of Big Tech companies. The US is also assessing the security issues surrounding Chinese tech firms operating in the US. Under President Trump, TikTok was set to be completely banned, but Biden has yet to make his formal stance known.
Despite all these hurdles, ByteDance is still expected to IPO TikTok due to the significant amount of capital it could raise that could boost its global business strategy.
When will the TikTok IPO happen?
There is no confirmation that TikTok will IPO, let alone when it will happen. Rumours had the IPO date at some point in 2020, which was pushed back amid Trump’s threats to ban the app altogether.
Now speculation has it the app will IPO at some point this year instead. But, until all the regulatory issues have been sorted out, and TikTok separates from its sister company Douyin, it’s unlikely to take place.
How much is TikTok worth?
In July 2020, investors valued TikTok at about $50 billion – which was already more than established social media giants like Snapchat.
However, ByteDance as a whole is worth a lot more. In private capital markets, estimations of its value have risen to $250 billion – with some sources suggesting up to $400 billion – which would make it the world’s most valuable start-up.
How to trade the TikTok IPO
Once TikTok has been listed, you’ll be able to trade its shares in the same way as any other stock on the market. Find out about IPO trading with us.
In the meantime, you can trade shares with City Index in these easy steps:
- Open a City Index account, or log in if you’re already a customer
- Search for the company you want to trade in our award-winning platform
- Choose your position and size, and your stop and limit levels
- Place the trade
Alternatively, you can practise trading shares in a risk-free demo account.
What is TikTok?
TikTok is a video app that allows users to create content with popular music and filters, that are shared with both followers and global users. The popular videos are then widely shared across other social networks including Facebook, Instagram, Snapchat, Twitter, and YouTube.
Originally called Douyin, it was created in China in 2016, and was launched globally as TikTok the following year. The app is still called Douyin in the China market.
TikTok has become incredibly popular over the last year, especially during the Coronavirus pandemic when stay-at-home measures pushed more and more people online to fill time. In early 2021, it had over 689 million active monthly users worldwide. Despite being a relatively young app TikTok is already one of the most downloaded apps in the world.
However, it’s already had its fair share of controversies, and not just the US-China disputes covered above. In 2019, TikTok was briefly banned in India over concerns about pornographic content and predatory behaviour on the app. And was again banned in India amid tensions between China and India over tech companies not safeguarding data. TikTok’s Chinese owner was also fined $5.7 million by US authorities for illegally collecting children’s data.
What is ByteDance?
ByteDance was founded in 2021 by Zhang Yiming; the company is based in Beijing, China. Following the success of his news app Toutiao – which means ‘headlines’ – Yiming went on to develop TikTok and its Chinese counterpart Douyin.
While TikTok is what ByteDance is most well-known for globally, the app only contributes about 3% to the parent company’s revenue – the rest is made up of its domestic activities. However, TikTok has meant that ByteDance succeeded where a lot of other Chinese tech companies failed: it expanded beyond China.
How does TikTok make money?
TikTok makes money from advertisements shown in platform – a service it offers to brands that enables them to promote products within the app. It also offers in-app purchases of coins that can be exchanged for digital gifts – users can ‘gift’ to their friends, followers, or favourite creators.
The company’s additional revenue streams are live streaming, games, and e-commerce.
Is ByteDance profitable?
As a private company, it can be difficult to ascertain exactly how much money TikTok and its parent company make. As of 2020, it was estimated that TikTok earned approximately $1 billion in revenue. But this is just a fraction of ByteDance’s overall revenue for the year, which came in at approximately $30 billion.
The current projected valuation of TikTok ($50 billion) puts it at 50x its current revenue. But according to Reuters, the company's management team expects to achieve $6 billion in revenue in 2021.
TikTok’s biggest investors
Currently, TikTok’s top shareholders are:
- CMB Wing Lung Bank
- Morgan Stanley
- Goldman Sachs
- Bank of China
- K3 Investors
- Primavera Capital Group
- Kohlberk Kravis Roberts
- Tiger Global Management
- GGV Capital
What is TikTok's business model?
TikTok’s business model combines the classic social media platform strategy that enables users to share content with a creative platform that enables users to make and share their videos. Functionality-wise, it is a mixture of Instagram, Facebook and YouTube.
The element that makes TikTok stand out is that it's powered by artificial intelligence. When users engage with content, the app collects their data which is fed into TikTok’s machine learning algorithm. This enables the app to refine the quality of users’ content feed and enhances the content experience, which the company claims, in turn, boosts engagement and generates more data.
According to TikTok: ‘Our mission is to capture and present the world’s creativity, knowledge, and precious life moments, directly from the mobile phone.’
TikTok’s business model has also had to take into account the regulations it now faces in different countries. After being banned in India, TikTok reduced its staff in the country to minimise its losses. And following the tensions with the US, ByteDance ringfenced TikTok away from all of its China-based assets to appease US regulations over its operations.
Who are TikTok’s competitors?
TikTok aims to have global dominance in the video content creation sphere, and although it competes with other big names like Instagram – which launched reels following TikTok’s success – it remains the most popular content creation app among young people or ‘Gen Z’.
TikTok’s dominance was helped by the fact it bought out its most direct competitor Musical.ly in August 2018 for $1 billion.
Who is the CEO of TikTok?
Vanessa Pappas was appointed CEO of TikTok, following the resignation of Kevin A. Mayer in August 2020.
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.