Investing in TikTok: Why Does the Ordinary Investor Have Limited Access?

TikTok Phenomenon - Huge Potential but Hidden Behind Closed Doors

TikTok is a global social media platform where an increasing number of users create, edit, and share short video content with audiences worldwide. The app belongs to ByteDance, a Chinese tech giant founded in March 2012 by Zhang Yiming and Liang Rubo. Since its debut in 2017, TikTok has attracted around 1 billion active users each month, becoming the fifth-largest social media platform in the world – after Facebook, YouTube, WhatsApp, and Instagram.

It’s worth noting that besides TikTok, ByteDance manages many other projects, including the Douyin (variant for the Chinese market), the mobile game Mobile Legends, PICO devices, and the content platform Lemon8. The company’s first product was Toutiao – a news service that used advanced algorithms to personalize content for each user.

Today, many potential investors ask: how to invest in TikTok? Unfortunately, the answer is straightforward – it’s not possible directly. But why exactly?

Main Obstacle: ByteDance Is a Private Company

The core issue is that ByteDance, TikTok’s parent company, has never gone public. This means TikTok shares are not available to ordinary investors through standard stock trading channels.

ByteDance’s valuation fluctuates significantly over time. At its peak, the company was valued at over $400 billion. However, in October 2023, during employee stock buyback programs, the valuation dropped to around $223.5 billion. This substantial change illustrates how volatile the market outlook for Chinese tech firms can be.

Indirect Ways to Gain Exposure to TikTok’s Growth

Although you cannot buy TikTok shares directly, there are alternative options for investors interested in profiting from the platform’s success.

Investments in TikTok Investors

Several large international investment funds hold stakes in ByteDance. These include:

KKR & Co Inc – a global investment firm based in the United States, which invested in ByteDance twice: in 2018 (at a valuation of $75 billion) and in 2020 (when ByteDance was valued at $180 billion). KKR & Co Inc shares are listed on the New York Stock Exchange under the ticker KKR.

SoftBank – a Japanese investment holding company that, through the SoftBank Vision Fund, made an undisclosed investment in ByteDance in 2018. SoftBank’s shares are traded on the Tokyo Stock Exchange.

By purchasing shares of these companies, you indirectly participate in TikTok’s success. However, it’s important to remember that both portfolios contain many other investments, meaning returns depend on the entire spectrum of their activities, not just TikTok.

Private Investment Platforms

More advanced investors might consider alternative platforms such as EquityBee or EquityZen, where shares of selected private tech companies are sometimes available. However, these options are usually only accessible to accredited investors and require higher initial investments.

Is Investing in TikTok Worth It? Promising Numbers vs. Real Risks

Growth Potential

The numbers are indeed impressive. TikTok’s annual revenue grew from just $63 million in 2017 to $9.4 billion in 2022. The app has been downloaded 3.3 billion times since its launch. Such a growth trajectory suggests significant earning potential with a large user base.

Increasing Political and Regulatory Risks

However, investing in TikTok involves substantial risks that should not be underestimated. Primarily, the fact that ByteDance is a Chinese company leads to geopolitical and regulatory tensions.

TikTok is completely banned in India, Iran, Pakistan, and several other countries. Belgium and Canada have prohibited public sector employees from using the app on work devices. The United States is actively considering restrictions or a complete ban of the platform. Former President Donald Trump signed an executive order in 2020 to ban TikTok unless ByteDance sold or spun off the app within a specified timeframe. The order was later canceled by the Biden administration, but pressure on ByteDance remains.

Over 30 US states have banned their employees and contractors from installing TikTok on devices funded by public money. This demonstrates the scale of regulatory uncertainty surrounding the platform.

Competition on the Horizon

Ultimately, although TikTok’s success is unprecedented, competitors are not sleeping. YouTube launched YouTube Shorts – a feature offering very similar capabilities to TikTok. Other major social platforms are also developing competing features. This means TikTok’s dominant position is not guaranteed forever.

Will TikTok IPO? Official Statements vs. Speculation

During the Trump administration, there were numerous rumors that ByteDance was considering spinning off TikTok as a separate entity and conducting its first public offering (IPO). However, these plans never materialized.

In August 2022, Julie Gao, ByteDance’s CFO, explicitly told employees that the company does not plan to go public. Currently, there are no concrete indications that ByteDance will independently list or conduct an IPO for TikTok. Of course, this scenario could change in the future – an IPO of ByteDance or TikTok would give external investors a chance to realize some profits. But as of today, this remains pure speculation.

Direct Answers to Common Questions

Can I buy TikTok shares now? No. TikTok, like its parent company ByteDance, is not listed on any public exchange. Ordinary investors do not have direct access to purchase.

What is the current price of TikTok stock? There is no official TikTok share price because shares are not publicly traded. According to unofficial reports, in 2023 ByteDance offered stock options to employees at $155 per share, but this is an internal employee valuation only.

Is there a ticker symbol for TikTok? No. Until TikTok goes public, it will not have a stock ticker.

Can I buy shares of ByteDance, TikTok’s parent company? Unfortunately, neither TikTok nor ByteDance is public. Ordinary investors do not have access to buy their shares on the secondary market.

Conclusions: Barriers for Ordinary Investors Remain High

TikTok is undoubtedly a potentially attractive investment – a huge user base, impressive revenue growth, and global recognition speak for themselves. However, until ByteDance decides to go public or spin off TikTok as a separate public company, ordinary investors are limited to indirect exposure.

Investing in funds that hold stakes in ByteDance, such as KKR or SoftBank, offers at least partial access to TikTok’s growth, though always with the risk associated with the diversification of these firms’ portfolios. For more conservative investors, waiting for a potential future ByteDance or TikTok IPO might be a wiser strategy than trying to find workarounds.