An investment by Abu Dhabi AI firm G42 valued ByteDance Ltd. at around $220 billion, a significant discount from the $300 billion TikTok’s owner set during a recent share buyback. Through its 42XFund, G42, controlled by UAE royal Sheikh Tahnoon bin Zayed Al Nahyan, it recently acquired a $100 million stake. One of the people, asking not to be identified, said another fund bought ByteDance at a $225 billion valuation shortly after. Since Washington signaled it might be open to banning viral video phenom TikTok, which lawmakers have accused of posing a national security threat, TikTok’s price tag has been soaring.
As a last resort, TikTok’s leadership is considering separating from its Chinese parent to address those concerns. A potential after-effect of Silicon Valley Bank Inc.’s bankruptcy, which stunned startups from the US to China, has yet to be factored into ByteDance’s valuation in the G42 transaction. In 2021, Tiger Global Management bought shares for around $460 billion.
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G42 is a private company operated by Sheikh Tahnoon, the UAE’s spymaster.
The company is involved in everything from cloud computing to vaccines and driverless cars. As part of his AI firm’s $10 billion 42XFund, he partnered with additional financial backers to invest in technology companies across emerging markets. To expand across Asia, the company hired Jason Hu, the former head of investment at China’s JD.com Inc. After three years of Covid restrictions and ongoing regulatory crackdowns, the Middle Eastern firm may be betting on ByteDance’s long-term potential.
The growing interest in AI after ChatGPT’s public launch could also benefit ByteDance, which pioneered algorithms for video and news a decade ago. A 42XFund representative declined to comment. In response to a request for comment, a ByteDance spokesperson did not immediately respond. Although Beijing’s intentions for the private sector remain unclear, some investors believe China’s embattled tech sector may finally get back on track for growth. It has repeatedly reassured investors and entrepreneurs that Xi Jinping’s government is pro-business.
ByteDance, which bought TikTok’s predecessor to gain a foothold in the US, is one of only a handful of Chinese app developers who have made it big overseas. A select group of upstarts includes Shein Group, AliExpress, and PDD Holdings Inc.’s bargains app Temu.
Advertisers targeting a younger demographic were attracted to ByteDance’s marquee service. In addition, it has created a niche for selling goods live via social media to millions of users worldwide. His popularity spooked some in Washington. Last week, the White House endorsed a bipartisan bill that could grant the president the power to stop TikTok’s sale, which would be catastrophic for the Chinese firm’s international ambitions.
Given global market volatility, an IPO by ByteDance is still a ways off. The company has explored options, including Hong Kong and the US. The Beijing company offered to buy back $3 billion of its shares last September at a valuation of about $300 billion, allowing investors like Susquehanna International Group and Sequoia Capital to cash out. Since TikTok alone generated $12 billion in revenue in 2022, ByteDance isn’t in urgent need of cash.
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