TikTok isn't just for making snazzy videos. It's also for making money, as many of the company's backers know. Owned by ByteDance, TikTok shares aren't available on the public market, but that might change soon.
Here's what to know about ByteDance's potential IPO, which will likely land on a Chinese exchange.
ByteDance plans to take the Chinese version of TikTok public.
In China, social media users can access something called Douyin. Reportedly, Douyin has more advanced e-commerce features than TikTok and stricter regulations on what kind of content is allowed.
ByteDance expects to take Douyin public in China. With this in mind, it seems that TikTok might not be going public, but rather its sister app. It's possible that ByteDance wants to list TikTok on a U.S. exchange in a separate IPO.
Investors will be able to snag Douyin shares to compensate for TikTok's private status.
Until ByteDance decides to take the entire company—or until it lists TikTok—the closest investors will be able to get is Douyin stock. For U.S. investors, this proposed Chinese stock will be accessible through CDRs (Chinese depositary receipts).
Similar to ADRs (American depositary receipts), CDRs are a way for international investors to access Chinese common stock.
Why ByteDance is pursuing a standalone IPO for the Chinese version of TikTok
Recently, large IPOs have encountered pushback from Chinese regulators. The most prominent is Ant Group, a fintech company led by Alibaba's founder Jack Ma.
The Ant Group IPO was projected to be the largest in the history of Chinese exchanges at $37 billion. It was monumental that Ma decided to go for a listing in his home country, especially considering that he listed Alibaba in New York.
With Ant Group's public offering still on the backburner following governmental orders to restructure the business, Chinese companies are on their toes around regulators. It's highly plausible that oversized IPOs will get shot down in the same vein as Ant Group. For ByteDance, it seems that standalone IPOs for its various holdings are a safer route to the public domain in China.
Douyin's IPO hasn't been approved.
I honestly don’t think you need to own social. But will buy Douyin when it IPOs.— MrQ (@MataeQ) October 20, 2020
If we've learned anything from the Ant Group IPO, it's that you shouldn't place all of your eggs in one basket, particularly when you're deadline is with the Chinese government. The government hasn't approved the ByteDance standalone IPO yet and, while it will likely pass, there isn't any certainty until it happens.
TikTok's parent company hired a new CFO, which is always a good sign.
Adding a fresh-faced CFO to the executive lineup is usually a good sign for companies seeking their own public offering. It's a way for companies to get all of their ducks in a row before taking the monumental step towards a registration statement.
If it weren't for data concerns, we might already have a U.S.-listed ByteDance stock.
Bytedance's margins are similar to Facebook's, which has one of the best margin profiles of all-time 🤔— Turner Novak (@TurnerNovak) March 30, 2021
Since U.S. leaders had security concerns about TikTok, ByteDance avoided a potential New York listing. The IPO could have been all wrapped up by now, but it seems that the hoops that massive tech companies must jump through to get to their IPO are getting smaller and smaller.