Tiger Global Management has taken a stake in ByteDance, the Chinese owner of the viral video application TikTok, joining other global investors such as SoftBank and Sequoia Capital scrambling to capitalize on the explosive popularity of short video.
The New York-based investment group discussed the issue in a letter to investors this week, saying it had “bought stocks in the past 21 months at a low multiple of future free cash flow”. Tiger Global did not disclose the amount of the investment.
Investors valued ByteDance at $ 75 billion two years ago following a $ 3 billion funding cycle led by tech conglomerate SoftBank, making it the second most valuable start-up behind Alibaba’s Ant Financial.
Tiger Global started buying stocks at around half that value and strengthened the position through purchases in secondary markets, people familiar with the transactions said.
ByteDance’s shares have recently changed hands in secondary markets at prices that give the company an implied valuation of between $ 90 billion and $ 100 billion, according to several people familiar with the transactions.
ByteDance and Tiger Global declined to comment.
This investment, which has not been previously reported, demonstrates the support of the prominent technology investor as ByteDance faces criticism over its handling of politically sensitive issues, including last year’s protests in Hong Kong.
U.S. national security regulators opened an investigation into ByteDance’s purchase of Musical.ly in 2017 last year – which helped fuel international growth for TikTok’s viral lip sync app – following calls from US Senator Marco Rubio to review the agreement.
ByteDance sought to allay concerns in the United States, by hiring a team from the law firm K&L Gates to advise on content moderation and public policy.
Society is expected to be one of the primary beneficiaries of the population closures put in place due to the coronavirus pandemic, as more and more people are spending time indoors on their phones.
Tiger Global has said it estimates ByteDance will control 19% of China’s online advertising market this year – which is expected to total about $ 81 billion, according to research by eMarketer. The company captured around 4% of the market in 2017, according to Tiger Global.
The rise of ByteDance has challenged the dominance of large Chinese Internet companies such as Tencent, which supported TikTok’s national rival, Kuaishou.
ByteDance had explored a public listing in Hong Kong as early as the first quarter of this year, reported the Financial Times. The company denied the report at the time.
Tiger Global, whose venture capital funds manage $ 15.5 billion in unrealized investments, is known as one of the biggest investors in public and private tech companies, including the maker of electronic cigarettes Juul and the Chinese transport group Didi Chuxing.
But the group recently faced a setback after start-up investments weighed on its equity hedge funds last year, caused by problems at Juul following a regulatory review of the vaping industry.
The firm said it had “already seen negative net revisions to the 2020 revenue forecast” for its companies “in total”, as the Covid-19 pandemic shakes capital markets and corporate spending.
“As always, we have encouraged our management teams to make disciplined choices about where and how to invest and to expect it to be more difficult to raise capital in the future,” writes Tiger. Global in the letter.
Additional report from Mercedes Ruehl in Singapore