G42 acquired its stake in ByteDance through its 42XFund, which purchased a $100 million-plus stake from existing investors in recent months
ByteDance Ltd., the Chinese parent company of the viral video platform, TikTok, was valued at roughly $220 billion following a private investment by Abu-Dhabi-based AI firm G42. This figure represents an impressive discount from the $300 billion set by TikTok’s owner during a share buyback program recently.
G42 acquired its stake in ByteDance through its 42XFund, which purchased a $100 million-plus stake from existing investors in recent months. Another fund had previously bought into ByteDance at a $225 billion valuation shortly after.
The company’s fluctuating valuation reflects the uncertainty surrounding the company since the US lawmakers accused TikTok of being a national security threat, leading to Washington signaling that it may be open to outlawing the platform. As a result, TikTok’s leadership is currently discussing the possibility of separating from its Chinese parent to address these concerns, though it is being considered a last resort.
The value of ByteDance in the G42 transaction does not yet reflect the potential aftermath of the Silicon Valley Bank collapse, which has raised concerns about broader systemic risks. ByteDance’s current valuation is well off its peak of around $460 billion in 2021 when the shares were bought by Tiger Global Management.
G42 and its interests span from cloud computing to vaccines and driverless cars, and now the Middle Eastern firm may be betting on Bytedance’s longer-term potential, as the recovering Chinese economy supports tech giants coming to the fore after three long years of covid restrictions and regulatory measures. Some investors believe that parts of China’s belligerent tech sector might, at last, be on the path to growth in the longer run, despite the persisting suspicion about Beijing’s objectives concerning the private sector.
ByteDance gained a foothold in the US by acquiring TikTok’s predecessor and is one of the few Chinese app developers to have tasted success abroad. Some of the lucky few were the Shien Group, PDD Holdings Inc’s app Temu and Ali Express.
ByteDance’s flagship service attracted advertisers keen on reaching a younger demographic, and the company has carved itself a niche selling goods to millions of users via live streams all over the world.
The popularity of TikTok has alarmed some in Washington, leading to the White House endorsing a bipartisan bill that could potentially grant the president authority to ban or force a sale of the platform, potentially dealing a major blow to ByteDance’s international ambitions.
Although ByteDance explored the option of an IPO, including in Hong Kong and the US, given the volatile global market, this remains to be seen. Offering a way for backers Susquehanna International Group and Sequoia Capital to cash in their gains, the Beijing company put forth an offer to buy back $ 3 billion of its shares at a valuation of about $300 billion.
TikTok’s estimated $12 billion revenue in 2022 has allowed ByteDance some respite and hasn’t put them in a cash crunch.