Every few years, a new app takes over the social media world. From MySpace, Twitter, and Facebook to Instagram, the social media space has witnessed many changes. As long as the new social media platforms offer an exciting way to interact with users, it’s bound to draw a crowd. In 2020, TikTok took this space by storm and now has over 800 million users worldwide.
TikTok is owned by a Beijing-based company called ByteDance, founded in 2012. While TikTok has enjoyed massive popularity, ByteDance is still a private company. But when can savvy investors expect to buy TikTok stock? When will it become a publicly-traded company?
Let’s explore the phenomenon that is TikTok and its journey to the stock market.
History of TikTok
TikTok took the world by storm in 2020, thanks to its innovative social networking. Users have been sharing videos that range from 3 to 15 seconds long, with the content being anything from lipsync comedy to short dance clips. And they’ve been rolling out longer video options, too. You can create and share content, all while interacting with others.
It was seemingly the answer short-form video content creators needed to replace the discontinued loop video app Vine in 2016.
At first glance, TikTok may not be an easy app to understand. However, based on its popularity, it does get addictive once you start using it and lends itself to personality and content-based followings.
Popular user handles have enough influence over their audience to start viral social media trends, particularly dances and filters. This has resulted in hashing communities similar to Twitter but more interactive. But because of the number of young people on the app, it was first considered a juvenile social media platform. However, as a wider demographic of users got involved with the app, it evolved from juvenile to “fun.”
ByteDance first launched the app for the Chinese market in 2016, under the name Douyin. However, once it went international in 2017, it was branded TikTok for the overseas market, and ByteDance retained Douyin for the Chinese market. The company runs these two apps on separate servers despite their identical nature in keeping with China’s censorship restrictions.
Data shows that Tiktok users, mainly 25 years and below, spend at least an hour a day on the app. About 41% of TikTok’s users are between 16 and 24. But by no means is TikTok restricted to this age demographic.
Older Millennials and Gen Xers, in particular, have mastered the space, providing entertaining and insightful commentary on what it’s like to grow older, seeing younger generations criticize fashion trends they grew up with, e.g., middle hair part, skinny jeans, etc., raising children, and even breaking into the professional influencer world with advice on stocks, finances, and more.
One generation-bridging account, The Old Gays, is a group of gay-identifying men in their mid-60s to late-70s. Their videos have gone viral, amassing an impressive 1.4 million followers. Another man by the name of Charles Millet, who is 85 years old, runs a TikTok with his granddaughter to help with his Alzheimer’s.
Even though it may seem like Gen Z runs the show, they are simply part of a larger audience of content creators that span generations of people who want to connect through short-form video entertainment.
Shou Zi Chew: Tiktok’s CEO and Bytedance’s CFO
At only 39 years old, the TikTok CEO has an enviable resume. Shou Zi Chew has a degree from Havard Business School and a stint as an intern at Facebook while it was still a startup. He took over leadership of ByteDance, a company estimated to be worth over $400 billion after various careers in the investment world.
Shortly after Shou Zi Chew took on his position as CFO at ByteDance, TikTok’s incumbent CEO stepped down, citing interference from the Trump administration. Three months later, Shou Zi Chew was appointed as TikTok’s CEO alongside his CFO position in the parent company. His job at TikTok is considered “the biggest job in tech” thanks to TikTok’s current growth and popularity.
Shou Zi Chew is a Singaporean national. He was the CFO of Xiaomi, a Chinese multinational electronics company, before joining ByteDAnce as CFO. He also has investment banking experience at Goldman Sachs for two years and at a Russian investment firm for five years before his stint at Xiaomi. At Xiaomi, he took the company through a successful initial public offering (IPO).
All his combined experience arguably makes him the best man for the job. However, Shou Zi Chew has quite the task ahead of him thanks to the never-ending data privacy complications from the US and Chinese governments. Additionally, the speculated TikTok IPO should keep him entirely occupied in both of his roles, a task that he seems to be up to.
Why TikTok Matters
Since its launch outside China in 2017, TikTok has experienced unprecedented growth in a short period, as it became the “most downloaded app of 2020,” according to BBC News.
The growth of TikTok could only be compared to a wildfire with 1 billion global downloads by 2019. TikTok is available in 150 markets in 75 different languages since 2018. And that is not all; this social media app is expected to hit an all-time high of 698 million monthly users worldwide.
Of course, all these stats have drawn a lot of media exposure and attention to the app. TikTok has beaten Facebook, Twitter, Instagram and Peloton in all its stats, including revenue of $34.3 billion in 2020.
TikTok Stock Availability on the Stock Market
The private Chinese company ByteDance owns TikTok, so any investment in TikTok would be categorized as a ByteDance investment. However, ByteDance’s private status makes TikTok stock unavailable on the stock market. If anything, the company probably arranges limited subscription agreements to larger investors.
ByteDance has received an investment from a notable investment firm Softbank. The company may likely be offering an IPO soon. The most likely pointer to this is that SoftBank is often keen to invest in successful IPOs, and ByteDance should be no different.
When Can You Buy TikTok Stock?
While it’s not clear when people can buy TikTok stock, there were reports that this would happen in the spring of 2020. Obviously, this did not happen. Another speculation stated that an IPO was slated for April of 2021. This date came and went, and nothing happened on the stock market.
Should there be an IPO, many speculate that Tiktok’s stock will go public in the US while ByteDance stocks will go public in Hong Kong.
TikTok Stock News
As you’ve noticed, there’s been widespread speculation about Tiktok stocks for the past two years. However, due to regulatory issues in the US and China, there is no concrete data to support or corroborate these claims. We can tell that there is bound to be an IPO for such a promising company as TikTok sometime in the future.
It’s critical to note that this company’s unique position, which has Tiktok headquartered out of California and the mother company in China, makes stock market regulations a bit more complicated than usual. Additionally, these two companies are still legally intertwined, making aspects of their business structure ineligible in either country.
Though TikTok overall has a favorable global presence, with 2.8 billion downloads globally in 2021, security issues and political and religious conflicts have led to it being banned, or under government scrutiny, in a handful of countries at one point or another.
In 2020, former Secretary of State Mike Pompeo announced that then-President Trump wanted to ban TikTok in the United States. The ban originated from tensions surrounding US-China relations, mainly regarding the security of Chinese-based apps. This triggered a bidding war over the app in America and resulted in a deal between Oracle and Walmart to purchase TikTok (making it a US-owned entity). Ultimately, the deal never went through.
A ban did happen in India, however, in 2020. The decision was made based on national security concerns and the misuse of data by China. Pakistan and Bangladesh are another two countries to have banned the app as they felt it contributed to unfair criticism against the countries’ religion and culture and contributed to rising rates of pornography and gambling. They did eventually lift the ban. The ban in India remains strong.
TikTok is technically banned in China; however, ByteDance has created an equivalent app that better complies with the government’s laws and policies.
In China, TikTok is called Douyin. The separation of Douyin and TikTok creates stronger security measures between the two platforms (even though they are essentially the same). It discourages security breaches that originate from Chinese users–which has historically been an issue for other countries–and uploaded Western TikTok videos won’t expose young people to content that the Chinese government feels is harmful to them. Within Douyin constraints, children under the age of 14 can only access the app between 6 am and 10 pm in the app’s “youth mode.”
What we need to understand is that any Chinese-based app must be approved by the Communist Party of China. Therefore, any app must follow Chinese law. These laws require government uses of data that other Western and Asian countries do not necessarily follow nor approve of. TikTok, as a Chinese-based app, will inherently be seen as a problematic security risk for as long as ByteDance owns it.
The app has made efforts to separate itself from China, even appointing former streaming chief of Disney Kevin Mayer as CEO–an appointment that lasted mere months–and to follow each country’s data policies. But anyone who chooses to invest in the app when the day comes must consider their own risk and the ongoing security conflicts the app may have globally.
Current TikTok Stock Outlook
TikTok is valued at over $50 billion, making it one of the world’s most valuable startups. With such a high market value, it’s no secret that many investors are itching to get a piece of the pie. And with the growth of social media marketing, TikTok’s value is only bound to grow more in the coming years.
Once TikTok’s stock is made public, investors can trade these shares as they would any other stock on the stock market.
Investment Advice: What To Look Out For
Because companies must remain quiet on the subject until they have formally met the Security Exchange Commission’s regulations, you will essentially be giving your best guess as to when TikTok will announce an IPO.
This doesn’t mean waiting around and watching the days go by until TikTok tells you it is going public.
There are general “things” you should watch for that will usually tell you a privately held company is revving up for public investment. Looking for these types of activity may better indicate an IPO over media statements. We’ve been told to expect an IPO for TikTok in the past and haven’t seen those expectations materialize.
You may see a major makeover of corporate policies and procedures, for one. All public companies in the US stock exchange need to meet the Sarbanes-Oxley Act of 2002 (SOX), which involves having a formal audit process for illegal activity and standardizing financial management.
Something else to look for is when a company starts writing off assets and inventory. Analysts and investors will also take a magnifying glass to a company’s finances to see how and if they will get the best value upon initial offering.
Senior management/governance may also change. This is perhaps one of the main reasons why assigning an American-based CEO gave rise to public speculations.
Private companies may also shed ancillary business segments, focusing on their core operations and the parts of the business that add the most value.
For younger investors, these trends may not be the easiest to follow, especially where TikTok is concerned. But it’s not impossible. Your own research into both ByteDance and TikTok will keep them on your radar and help you act faster once the company goes public.