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TikTok is the star of social media. Upstart networks such as Donald Trump’s Truth Social and Meta’s Threads might reach thousands or millions of users, but TikTok’s audience exceeds a billion. It launched an in-app US shop before Elon Musk’s X, and its popularity has forced YouTube and Instagram to create rival short-video formats. These qualities make it an attractive acquisition target. Its price could, on paper, exceed $180bn.
On Wednesday, US lawmakers voted in favour of a bill that would force TikTok’s Chinese owner ByteDance to either sell the app or face an app store ban. There are two areas of concern: possible collection of US user data by China and the potential for China to use the app to influence its audience.
TikTok is a source of news for its young viewers, though it should be noted that its main appeal lies in entertainment. After all, the app’s most-liked video involves a girl pulling faces at the camera. The company has said ByteDance is not controlled by the Chinese government and that all US data is routed to Oracle Cloud.
The US bill now moves to the Senate. An attempt to end Chinese ownership would result in a legal fight.
If the US did order ByteDance to cut ties, the possible pool of buyers for a company this size could include consortiums or big tech companies. Microsoft and Oracle showed interest during previous attempts to force a sale. Regulatory scrutiny over big tech acquisitions might be put to one side to facilitate US ownership.
What would they pay? TikTok makes money from digital advertising, in-app purchases and transaction fees. Information about sales and profits are not published by ByteDance, which is private, but revenues last year are reportedly close to $20bn. Valued at a Meta-like multiple of trailing sales, TikTok’s enterprise value might be close to $184bn. That is a large chunk of ByteDance’s own valuation — about $260bn based on last year’s share buyback from employees.
A forced sale is likely to mean a much lower price. TikTok is also reportedly lossmaking. Valued on a sales multiple closer to lossmaking peer Snap, it would be priced at about $88bn. If a sale were limited to US users, the revenue used in the calculation would be smaller. At 170mn, US users account for about 14 per cent of the total, though their revenue contribution will be higher.
Plus, TikTok’s global content is an important part of its appeal. Separation, and the complexity of a split, would reduce the app’s value even further.
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