Hong Kong – TikTok chief executive Chew Shou Zi’s testimony before Congress two weeks ago has done little to assuage the United States’ security concerns surrounding the social media company.
Yet it has shed new light on the fortune of one of the world’s richest people: Mr Zhang Yiming, the 39-year-old co-founder of ByteDance, TikTok’s Chinese parent.
ByteDance’s founders own about 20 per cent of the company, Mr Chew said in his testimony – a figure lower than reported estimates in recent years.
This could put Mr Zhang’s wealth at US$42.3 billion, based on the firm’s US$220 billion value from private trades revealed in March, according to the Bloomberg Billionaires Index.
This estimate is down about US$13 billion (S$17.3 billion) from September, when the world’s biggest start-up initiated a stock buyback that valued it at about US$300 billion. Two years ago, Mr Zhang could have been worth more than US$60 billion – making him one of Asia’s richest people – with investors willing to buy a piece at a valuation of almost US$400 billion.
ByteDance has had to deal with issues beyond just higher interest rates and inflation, which have taken a toll on technology companies.
Its TikTok platform, where teenagers post dance and singing videos and small businesses promote their products, has amassed more than 150 million US users, leading to concerns about China’s access to the data that the app gathers and the threat of a ban if it does not spin off from its parent.
Hostile hearing
Mr Chew on March 23 sat through a hostile 4½-hour congressional hearing in which he sought to protect the company.
“TikTok is caught in this geopolitical tug of war between the US and China as the clock ticks towards a US ban and forced sale,” said Mr Dan Ives, an analyst at Wedbush Securities in New York. “The fear is US consumers start to grow weary of the China data issue, which has impacted the perceived value of TikTok. This is all a game of high-stakes poker.”
Bloomberg’s wealth index amended Mr Zhang’s net worth estimate to reflect the stated ownership and drop in ByteDance’s valuation.
Most of the founders’ 20 per cent stake belongs to Mr Zhang, while co-founder Liang Rubo has about 1 per cent, according to a person familiar with the matter. This would give Mr Liang a US$2.1 billion net worth.
Institutional investors hold 60 per cent of ByteDance and employees own the remaining 20 per cent, according to Mr Chew’s testimony.
More power
While Mr Zhang no longer manages ByteDance’s daily operations, the founders’ shares have weighted voting rights, a common practice in the industry, Mr Chew said.
This likely gives them more power to push through decisions.
Mr Zhang stepped down as ByteDance chief executive officer in May 2021 and quit its board the same year, leaving both positions to Mr Liang, 40, his college roommate.
The valuation of ByteDance, founded in a four-bedroom apartment about a decade ago, has since surged at least 11 times. TikTok, along with its Chinese twin app Douyin, is the company’s crown jewel.
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Like many of its rivals, ByteDance was forced to curtail some of its riskier expansion projects – including in gaming and venture investment – under Beijing’s intensified scrutiny.
But the mounting US concerns over China’s influence have taken a toll on ByteDance.
While Mr Chew stressed that TikTok has committed US$1.5 billion to strengthening controls over its user data security, the firm’s leadership is considering separating from its Chinese parent, although that would be the last resort, people familiar with the matter have said. Bloomberg Intelligence estimates that the US business could be worth US$40 billion to US$50 billion alone.
Any TikTok sale or spin-off would amount to a technology export and require administrative approvals from China, a spokesman for the nation’s Ministry of Commerce told reporters before Mr Chew’s congressional testimony.
ByteDance itself is unlikely to give up its US arm easily, given that its algorithm is the basis for its lucrative business and TikTok probably has a shared code base with the group’s other apps, according to Bloomberg analysts.
This means ByteDance – and Mr Zhang – may have more tough times ahead.
“Amid increased scrutiny around data capture, even within its own app, TikTok may remain at a product disadvantage versus its rival social media platforms in the US,” the analysts wrote in a note last Wednesday. BLOOMBERG
TikTok committed to keeping app safe, says CEO Chew Shou Zi after US Congress hearing China says US presumption of guilt against TikTok is baseless
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