ByteDance’s US Backers Say China Growth to Counter Any TikTok Ban Damage

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(Bloomberg) — As TikTok fights to keep its popular video app available in the US, investors in parent company ByteDance Ltd. are being forced to re-evaluate financial prospects for a business valued at more than $300 billion as recently as late last year.

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Some of these American shareholders argue that, while a ban will take a near-term toll on their stakes, ByteDance’s China business is the real driving force behind the lofty valuation and an eventual payday.

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That’s because roughly 80% of Beijing-based ByteDance’s revenue comes from China and products like Douyin, a TikTok lookalike specifically for the Chinese market. And while TikTok boasts 170 million users in the US, the app has been downloaded some 5 billion times across other markets around the world, according to app intelligence firm Sensor Tower, meaning it can continue to operate in several important countries no matter what happens in the US. 

Any resolution for TikTok in the US — even a ban — would also clear a major roadblock for ByteDance if it ever decides to pursue an IPO, a long-rumored outcome for the tech giant that would be virtually impossible with a looming US shutdown hanging over the company’s head. 

On private secondary markets, “ByteDance is trading at a huge discount to what it’s really worth. That’s because we don’t know what’s going to happen with TikTok,” said Greg Martin, managing director at Rainmaker Securities, which facilitates trades in private tech companies, including ByteDance. He acknowledged that losing TikTok US, a piece of the business that’s “nowhere close” to reaching its potential, is nobody’s preference. But “the value of ByteDance could go up immeasurably once this is sorted out,” he said, even if it means TikTok going away. 

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TikTok’s fate has been in limbo for almost a year since Congress passed a national security law last spring that called for a ban on the app unless ByteDance spun off TikTok’s US business to a non-Chinese owner. The deadline for divestiture was Jan. 19, but President Donald Trump has since given the company an additional 75 days to orchestrate a deal to satisfy US concerns about its ownership before the ban kicks in. 

That uncertainty has weighed on ByteDance and its shareholders, many of whom are located in the US. Some 60% of ByteDance is owned by investors outside China who’ve collectively poured $19 billion into the business, according to PitchBook. That includes major US financial firms like Susquehanna International Group, General Atlantic and Sequoia Capital. Bloomberg spoke to half a dozen ByteDance shareholders for this story.

Those firms would prefer to see the wildly popular app continue operating in the US in its current form, because access to US consumers and its robust advertising market is a net positive for ByteDance’s business. But American investors also concede that TikTok’s US business is still small, and while estimates vary, some investors estimate TikTok US accounts for as little as 10% of ByteDance’s global revenue. Instead, these investors are encouraged by the fact ByteDance has plenty of other products in the global market with real potential. 

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“Most people still don’t grasp the scale of ByteDance’s China business, or how small the US actually is in the bigger picture,” said Mitchell Green, founder of Lead Edge Capital, an American firm so bullish on the Chinese tech giant that it bought more stock after former President Joe Biden signed the law last April that would eventually ban TikTok.

ByteDance has a sprawling suite of other popular apps in China, like news platform Toutiao and an AI business rivaling DeepSeek called Doubao, which built a chatbot similar to ChatGPT. Green believes Douyin has potential to rival e-commerce giants like Alibaba, JD.com Inc., and Temu-parent PDD Holdings Inc., and pointed out that ByteDance has also built China’s largest advertising business. “ByteDance remains a compelling investment case regardless” of what happens to TikTok, he added.  

That doesn’t mean investors are cheering for a ban. While TikTok US is not yet profitable, according to multiple people familiar with the matter, it remains one of ByteDance’s highest-potential markets. The US is the world’s largest advertising arena, and TikTok is used by half the country; Facebook and Instagram parent Meta Platforms Inc., for example, made 45% of its advertising revenue from the US and Canada last quarter. The US is also home to some of TikTok’s most-followed creators, and it’s a growing market for the company’s e-commerce ambitions with TikTok Shop.

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If ByteDance is allowed to keep control of TikTok and continue operating in the US, a best-case scenario for ByteDance, investors say the company’s valuation and IPO prospects will improve.

A sale, on the other hand, could also free ByteDance of its TikTok headache while leading to sizable payouts for US investors. TikTok could fetch anywhere from $20 billion to $150 billion depending on the details of the deal, said Claire Chu, a nonresident fellow at the Atlantic Council’s Global China Hub. That could translate to a payout of $12 billion to $90 billion for ByteDance’s global institutional investors, though they could get less than 60% depending on the deal’s structure. Trump has proposed some iterations of a deal that even include the US government taking a cut of the sale.

Among the biggest winners in a more traditional sales process would be Susquehanna, one of ByteDance’s earliest and largest backers, which owns a roughly 15% stake that could translate to $1.8 billion to $13.5 billion, based on Chu’s price range.

Other investors that could expect to cash in include private equity firm General Atlantic; investment firms BlackRock Inc. and TCV; hedge funds Coatue Management and Tiger Global Management; and venture firms NEA and Sequoia Capital, the latter of which owns a stake via its global growth fund, a person familiar with the matter said. Hong Shan, formerly known as Sequoia China, owns an even larger stake. Japan-based VC SoftBank Group Corp. also stands to be a top winner because its Vision Fund invested $2.5 billion, most of it in 2018 when ByteDance was valued at about $75 billion, according to a person familiar with the matter.

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Those payouts may be optimistic considering ByteDance has maintained that TikTok US is not for sale. For the past few quarters, the Vision Fund has marked down to zero the value of the US TikTok business, a person familiar with the matter said, a reflection of the app’s uncertain future. 

Board member and General Atlantic Chief Executive Officer Bill Ford recently told Bloomberg that ByteDance is exploring a deal to keep the app running in the US without a sale. ByteDance and TikTok did not respond to requests for comment.

ByteDance’s range of US shareholders may have different incentives and preferences for a path forward based on when they made their investment. One longtime investor told Bloomberg they worry that ByteDance won’t recoup TikTok’s full value in any US spinoff, and said shutting it down is comparable to “throwing out a Picasso.” Martin, from Rainmaker Securities, said a US ban could mean cutting the company off from a possible US IPO at some point down the road. 

There is no known timeline for a ByteDance IPO. Investors seem split on whether it will ever happen — be it in China or the US — and it’s not clear what the Chinese government might allow. If an exit is eventually in the cards, the company is likely waiting for the TikTok turmoil in the US to be put to rest, eyeing a ByteDance-wide IPO rather than one that separates its domestic and overseas businesses. CFO Julie Gao said at an all-hands meeting last week that the growth rate of the company’s China business has dropped relative to previous years, The Information reported, which raises fresh questions about any ByteDance IPO plans and the importance of its US business. 

Still, American investors are confident they’re holding a winning hand no matter the outcome. They simply want a resolution to the geopolitical rollercoaster. 

“I don’t think losing TikTok is Armageddon by any means,” said Martin. “ByteDance is a huge business, most of their revenue is outside the US, so it’s not like they’re not going to still continue to thrive.”

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