TikTok owner ByteDance considers listing China business in Hong Kong or Shanghai
Chinese tech giant ByteDance is considering listing its
domestic business in Hong Kong or Shanghai, people familiar with the matter
told Reuters, against a backdrop of rising Sino-U.S. tensions over its hit
non-China video app TikTok.
Of the two venues, the company prefers Hong Kong, according
to two of the people. One of the two also said ByteDance is simultaneously
studying the option to list its smaller, non-China business - which includes
TikTok that is not available in China - in Europe or the United States.
The eight-year-old Beijing-based tech and media company had
originally wanted to list as a combined entity, including TikTok and other
operations, in New York or Hong Kong in a blockbuster deal. TikTok allows
smartphone users to film and upload short videos with special effects within
seconds.
But ByteDance has been in talks with bourse operator Hong
Kong Exchanges and Clearing (HKEX) over the China business listing, one of the
people said. The company was also discussing it with Chinese securities
regulators, according to the other two people.
Reuters previously reported China accounts for the bulk of
ByteDance revenue, which one source said was around $16 billion in 2019.
A standalone listing could value the China business at more
than $100 billion in Hong Kong or on Shanghai’s Nasdaq-style STAR Market,
according to two sources.
The review of separate plans for the China business comes
amid growing concerns over U.S. regulatory scrutiny and uncertainty over
whether a 2013 audit deal between Beijing and Washington, that underpins
Chinese firms listing in the United States, will remain intact.
The people interviewed by Reuters said the idea of splitting
the whole business into two public listings and the venue discussions are
preliminary and subject to change. They spoke on condition of anonymity because
the information was private.
Plans may also be complicated by some heavyweight ByteDance
investors looking to take over TikTok at a valuation of $50 billion. TikTok
faces pressure from U.S. regulators who have spoken about banning the app, or
requiring ByteDance to sell it, over suspicions Beijing could force its owner
to turn over data on U.S. users.
ByteDance declined to comment. HKEX said it doesn’t comment
on individual companies. The China Securities Regulatory Commission didn’t
respond to a request to comment.
BYTEDANCE VALUED AT UP TO $140 BILLION
The discussions about the two listings were initiated before
the investor plans for a separate TikTok buyout emerged, according to one
source, but after the Committee on Foreign Investment in the United States
(CFIUS) started to look into on TikTok’s handling over user data last year.
The plans for the two listings may also not directly
influence how TikTok’s future will unfold, that person said.
ByteDance was valued at as much as $140 billion earlier this
year when one of its shareholders, Cheetah Mobile (CMCM.N), sold a small stake
in a private deal, Reuters has reported.
It generated around $2.9 billion in profit for 2019,
according to one of the people familiar with the matter. The company has set a
2020 revenue target of about 200 billion yuan ($28.62 billion). TikTok, over
the same period, is expected to hit revenue of $1 billion.
The bulk of revenue comes from advertising on apps under its
Chinese operations including Douyin - a Chinese version of TikTok - and news
aggregator app Jinri Toutiao, as well as video-streaming app Xigua and Pipixia,
an app for jokes and humorous videos.
Some of the company’s other overseas apps include work
collaboration tool Lark and music streaming app Resso.
In March, ByteDance founder Zhang Yiming announced a more
independent personnel structure for the China business, by appointing a
dedicated chairman and chief executive for the China business, while retaining
the role of global chief executive himself.
The China business listing idea comes as diplomatic strains
have risen between Beijing and capitals in countries elsewhere including the
United States, India and Britain.
U.S.-listed Chinese companies also face tightened financial
scrutiny and stricter audit requirements from U.S. regulators, prompting a
number of Chinese companies including search engine giant Baidu (BIDU.O) and
online travel firm Trip.com Group (TCOM.O) to consider abandoning a New York
listing and move instead to an exchange closer to home.
Shanghai’s tech-heavy STAR Market, seen as part of Beijing’s
campaign to become self-sufficient in core technologies, has become the second
largest market globally for IPOs so far this year, after the Nasdaq, with $10.3
billion raised via offerings. Hong Kong’s bourse ranked third with $8.9 billion
raised, according to Refinitiv data.
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