ByteDance's private valuation falls by US$100 billion in one year as IPO plans remain up in the air

ByteDance, the Chinese owner of the popular short video app TikTok, has seen its valuation drop by US$100 billion over the past year to about US$300 billion, according to sources and published deal offers.

The latest valuation of the technology giant, whose plans to go public remain up in the air, is the result of an unannounced deal two months ago, according to a person involved in the transaction, who declined to be named because the deal is not public. It was valued at about US$400 billion last year in private market deals.

The current valuation is on par with sales offers of ByteDance stakes published on Chinese tech media platform 36Kr. One stake posted to the site on June 1 values the company US$320 billion, but it mentions that the price is "negotiable". That deal was already US$30 billion lower than the valuation given in an offer posted in February. The tips published by 36Kr do not disclose information about potential buyers or sellers.

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Another unpublicised sale offer earlier this year valued ByteDance at US$280 billion, according to an investor who did not take the deal.

At US$300 billion, the internet giant remains one of China's most valuable tech firms, rivalling the likes of Tencent Holdings, with a current market capitalisation of about US$470 billion on the Hong Kong stock exchange, and Alibaba Group Holding, with a market cap of about US$300 billion. Alibaba owns the South China Morning Post.

Since being founded in a Beijing residential flat by entrepreneur Zhang Yiming a decade ago, ByteDance has grown at an astonishing pace only recently hampered by China's crackdown on Big Tech last year.

The company, which also runs Douyin, the Chinese version of TikTok, received a boost last year when its rival Kuaishou Technology went public in Hong Kong. ByteDance's private valuation rose along with its rival's stock right after the initial public offering, before Beijing's crackdowns started to weigh heavily on the market. Kuaishou has lost roughly 80 per cent of its value since its peak in February 2021.

Some of ByteDance's long-term investors, mainly venture capital funds, have been trying to cash out. Tiger Global Management, which has held equity in the company since 2018, estimated the company's valuation at less than US$300 billion. Sequoia China, which invested in ByteDance as early as 2014, has denied a Monday report from The Wall Street Journal that it valued the company at just US$180 billion.

A Sequoia China representative declined to comment on ByteDance's current valuation. ByteDance and Tiger Global did not respond to requests for comment on Wednesday.

As with many Chinese tech companies, ByteDance's prospects for profit growth in the domestic market remain clouded by tightened regulations. The central government has become more intrusive in regulating short video content. A new law governing the use of recommendation algorithms went into effect in March.

ByteDance also faces increased competition, especially from Tencent, which has introduced a new short video service to its ubiquitous messaging app WeChat.

But TikTok remains extremely popular overseas, with 1 billion users across the globe, compared with 600 million daily active users on Douyin. The Chinese app's popularity has even invited political scrutiny in countries like India, where it has been banned since 2020, and the US.

In a major corporate reshuffle in Nov 2021, former chief financial officer (CFO) Chew Shou Zi, who previously helped pave Xiaomi Corp's way to an IPO, stepped down from that role to focus on his work as chief executive of TikTok.

A month earlier, ByteDance hired another CFO, veteran corporate lawyer Julie Gao, who has advised many Chinese technology companies on public listings and other transactions.

The company last month also renamed several Hong Kong-registered entities, including one for "Douyin", renewing speculation about whether the Chinese short video business will be floated on the city's bourse.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2022 South China Morning Post Publishers Ltd. All rights reserved.

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