For ByteDance, 2020 is a year of ups and downs, with ByteDance's valuation reaching $140 billion, becoming the second largest Internet giant in China after Ali and Tencent. But overseas, its short video application TikTok has been caught in a geopolitical storm.
US President Trump, citing data security, asked ByteDance to spin off TikTok's U.S. business within 45 days, or else it would have to shut down. ByteDance was forced to negotiate a sale, with potential buyers including business giants such as Microsoft, Oracle and Walmart, as well as U.S. investors in Byte.
Between July and September of that year, TikTok experienced twists and turns such as CEO departure, prosecution of the Trump administration, rejection of Microsoft's acquisition, etc., and the whole incident finally ended with Oracle becoming TikTok's "trusted technology provider".
Although the incident has subsided, its aftermath is far from over. Since then, ByteDance has opened the road of "data localization" on a global scale, that is, "China's data is in China, and overseas data is overseas".
Since then, ByteDance has doomed the future to face the world with a holistic outlook, and business separation and national border isolation are its only way out.
A landmark event was the appointment of Chow, a Singaporean Chinese, as CEO of TikTok in April of the following year, which was described by outsiders as "striking a balance between the West and China." ”
1. IPO rumors are rife
Zhou Waszi had been appointed CFO of ByteDance a month before he became CEO of TikTok, so ByteDance was rumored to be preparing for the listing, but it was finally discontinued. Now, a year later, ByteDance's recent frequent moves have revived speculation about its listing.
On May 8, according to the website of the Hong Kong Companies Registry, ByteDance (Hong Kong) Limited changed its name to TikTok Group (Hong Kong) Limited on May 6. Beijing ByteDance Technology Co., Ltd. changed its name to Beijing Douyin Information Service Co., Ltd. In addition, several other companies under ByteDance have also changed their names to "Douyin".
ByteDance was rumored to be preparing for an IPO both accompanied by the appointment of a new CFO.
Before Zhou Wasage joined ByteDance, he was a Xiaomi executive, successively serving as president of Xiaomi's international department, senior vice president, CFO and other positions, and was deeply involved in Xiaomi's listing work, and its airborne ByteDance was interpreted as Byte's pursuit of IPO. However, only a month after Zhou Shouzi joined the company, ByteDance announced that "after careful study, it is believed that the company does not have the conditions for listing for the time being, and there is no listing plan at present." ”
This response says at least one thing, that ByteDance did have a listing idea at the time, but for various reasons it ended up running aground. As for the reasons, the Wall Street Journal may be worth referring to, which said that Byte decided to indefinitely shelve its overseas IPO plan at the end of March of the same year because it was related to the state's regulation of data security. What happened to Didi of tou tie after going public in the United States in July of the same year can explain the problem.
The key man this time was Julie Gao, a senior partner at Skadden, who joined Skadden on April 25.
According to the data, Gao Zhun has participated in the IPOs of a number of Chinese technology companies, including Meituan, JD.com, Pinduoduo, and Xiaomi, and he is extremely familiar with ByteDance, and has been deeply involved in ByteDance's acquisition of Musical.ly, Mu Hitomi Game Company, and several rounds of private equity financing. Prior to GMI's succession, the CFO position at ByteDance had been vacant for 5 months.
Knowing both law and finance, and familiar with byteDance's business system, Byte and High Precision staged a "virtual position" and "prepared". At the same time, multiple sources said that ByteDance opened a new round of option buybacks in April at a price of $142 per share, up 7.5% from $132 last year.
The increase in the repurchase option, the arrival of the new CFO, the renaming of its companies, all indications that this time the ByteDance IPO is coming for real. But the anomalous point is that global stock markets have continued to fall this year, and the stock prices of Internet technology companies have fallen particularly badly, and the stock price of Byte rival Meta was still $330 at the beginning of the year, and as of last week's close, there were only $203 left, a drop of as much as 40%.
Against this backdrop, there are even views that the "music of liquidity" is about to stop and that the 10-year boom in financial markets is coming to an end. At such a juncture, what kind of consideration is ByteDance in if it chooses IPO?
2. A few conjectures about ByteDance
Conjecture one: the economy is down, valuations are declining, and shareholders are eager to exit
As we all know, secondary market listing is the main way for investment institutions to cash out and exit, but if the company is unable to go public for a long time, the demand for capital turnover and cash returns of investment institutions will be difficult to solve, and enterprises will naturally face pressure from shareholders.
As a global social giant, ByteDance has completed 10 rounds of financing in the 10 years since its establishment, with a cumulative amount of more than 7 billion US dollars, so the situation facing the listing problem is more complicated. For example, in November 2021, Bloomberg reported that Susquehanna International Group, one of ByteDance's largest investors, was seeking to sell $500 million in shares.
At that time, ByteDance's valuation had just experienced a major decline, from a valuation of $500 billion in July of the same year to $360 billion in October, and a valuation of $140 billion in three months.
There is no doubt that in the period of abundant liquidity in the financial market, ByteDance does not need to rush to the market, its own revenue is growing rapidly, its cash flow is sufficient, and the capital is willing to accompany it. However, at the moment when the global stock market continues to decline and the international situation is confusing, the time left for ByteDance to tell the story is not much, and the longer it is delayed, the higher the risk of valuation decline, which is the most feared by investment institutions.
Pan Helin, co-director and researcher of the Digital Economy and Financial Innovation Research Center at Zhejiang University's International United Business School, believes that if Douyin chooses to launch its listing now, it may not be the best time. Whether it is a Hong Kong stock or a US stock, the current liquidity is not very ideal, if the current forced listing, at this stage for the valuation of Douyin is difficult to say optimistic.
At present, important shareholders of ByteDance are Sequoia Capital China, SoftBank Vision Fund, Yunfeng Fund and KKR. Other investors who have participated in the financing include Source Code Capital, Morningside Capital, SIG Haina Asia, Shunwei Capital, CCB International, Transatlantic Investment, Primavera Capital, Tiger Fund, etc. None of them are compatible, and when ByteDance goes public is related to the big guys' money bags.
Conjecture two: the business layout is slowing down, and the road to expansion is blocked
Objectively speaking, ByteDance has not created a blockbuster APP since Douyin. In the track of competition with Tencent, whether it is social products such as Fei chat or multi-flash, they all ended in failure, the Fly Chat team was disbanded, and duo-flash was merged into Douyin.
The roof leaked during the overnight rain. In 2020, ByteDance made a full bet on the education track, recruited a large number of employees and launched more than 20 subdivided products, but encountered the most stringent education regulatory policies in history, and the large-scale layoff of related businesses caused Byte's vitality to be seriously injured.
Obviously, in addition to the obstruction of its own original business, ByteDance's previous road of relying on mergers and acquisitions to quickly enter unfamiliar industries has not worked. In addition to the education track, finance, games and other sectors have also encountered resistance to varying degrees. At the beginning of this year, ByteDance's investment business was completely abolished, the staff of the strategic investment department was merged into various business lines, and the financial investment sector was completely dissolved.
Reflected in the revenue performance, informed sources said that ByteDance's revenue last year was about 58 billion US dollars, an increase of 70% year-on-year, compared with the growth rate of 111% in 2020, the growth rate slowed down significantly.
Therefore, from the perspective of the company's own development, ByteDance wants to go further, and listing is obviously the only way. Only in this way can we lay out our own business ecology with higher efficiency and achieve performance breakthroughs on a larger scale.
In this regard, Atacama, an author of financial media, believes that in addition to its own business development needs, ByteDance's name change and even the potential listing possibility can be seen as ByteDance's integration and risk management of its own brand in the context of global business. In the capital market, business development and brand image, ByteDance deliberately distinguishes between domestic and international risks and isolates risks.
3. The future path of ByteDance
Finally, let's talk about byteDance's layout in emerging tracks. At present, the more eye-catching is the AR/VR track where its head show brand Pico is located, ByteDance has just recently increased the sales target of VR in 2022 from 1 million units to about 1.8 million units, and it should be known that the shipment of Pico last year was about 500,000 units. If the shipment target can be completed in 2022, the shipment volume will achieve a rapid growth rate of 260%.
Of course, there is still a big gap between this and Meta, the head company in the field, but relying on the huge domestic demand market in China and the rapid development of the entire track, ByteDance may not be able to achieve cornering overtaking in the future.
Interestingly, the founder of ByteDance was very respectful of Facebook at the beginning of his business, and he mentioned many times in internal meetings that "or we should do Facebook." In the end, Although ByteDance did not become Facebook, it gradually became a social giant like Facebook's parent company Meta.
The same is the global route of social media, the same huge investment in the acquisition of VR headset manufacturers. Meta hopes to build a new software and hardware ecology (meta-universe) by betting on the next generation of computer parts; ByteDance wants to extend the advantages of its applications to the next generation of terminal equipment through VR/AR.
Compared with other domestic Internet companies, ByteDance has great advantages in the social media share of overseas markets, and in the future, with the acceleration of its emerging tracks such as VR/AR, relying on social media empowerment, ByteDance is likely to become the first Chinese company to conquer overseas markets after the wave of smart phones.