- 3.5 billion installations.
- One billion active users as of Q3 2022 (September 30, 2022).
- 167 million videos watched in an internet minute.
- The average user spends over 1.5 hours a day here.
- Available in 150 countries. In the top 10 Most Popular apps in 124 of these countries.
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Three guesses to figure out which app we are talking about. If you are a user of this app, you probably figured it out: TikTok. This video-sharing social networking app, from China’s Bytedance, has taken the world by storm since it was launched internationally in 2017. We explain how to buy TikTok stock in 2023.
TikTok is Bytedance’s crown jewel. There are only three social platforms with more monthly users than TikTok: Facebook, YouTube, and Instagram. Various reports have estimated its value at around $50 billion, while Bytedance is valued at $300 billion.
How to Buy TikTok Stock?
How To Buy TikTok Stock Shares in 2023
However, both Bytedance and TikTok are private companies. So you can’t invest in them by buying their shares in the stock market or via mutual funds. There is no prospectus you can glance through that will tell you when it will go public. How can someone buy TikTok shares , then? No worries, Wall Street has multiple resources to help you with TikTok stock.
There are three options for people who want to invest in TikTok:
- Invest in listed companies that own TikTok/Bytedance shares: Two of Bytedance’s most prominent investors, Softbank and KKR (Kohlberg Kravis Roberts), are publicly traded. You can invest in TikTok indirectly by buying their shares. Softbank has also been an investor in companies like Uber and WeWork. KKR is a US private equity firm based out of New York.
- Invest in ByteDance using a pre-IPO platform: Several platforms act as a secondary market for pre-IPO companies. This means shareholders of privately listed companies can sell their shares to interested buyers. Most shareholders who want to sell their shares are employees of these companies who hold ESOPs (employee stock options), which are illiquid in public markets. This is an excellent option for buyers and sellers for private companies. That said, Reuters reported, on October 12, that Bytedance “is initiating a second stock option buyback for employees this year at a higher price than the previous one to try and motivate staff amid slowing growth and uncertainty over a plan to go public.” It offered to buy back shares at $152 a unit, up from the $142 it had offered earlier in 2022. If you want to buy a TikTok share, you will likely have to pay over $155 a pop. TikTok prices in the private market are a little volatile now.
- Wait for the company to go public: The third option to invest in TikTok is simply waiting for either Bytedance or TikTok to come out with an IPO. In the previous point, the Reuters article says that “Chief Financial Officer Julie Gao told employees at an internal meeting that the company had no timeline for an IPO.” So, you would be better off buying shares from the pre-IPO platforms.
Some Pre-IPO Platforms that You Can Use to Invest in TikTok Shares
- Forge Global: This is a platform for private company shares. The minimum investment required is $100,000.
- EquityZen: This is a marketplace for accessing pre-IPO equity. The platform buys shares from employees or early investors in private companies and then sells them to you. Minimum investments start at $10,000. You can buy or sell several per-IPO stocks here, including Bytedance.
However, if the minimum investments needed are very high for you, option 3, waiting for the company to go public, would be the best one. You can choose from several providers to open a brokerage account.
Reasons to Invest in TikTok
Since TikTok is part of a privately held company, it is impossible to do a technical or fundamental analysis of its stock. Below are some points that can help you make your decision.
This is a viral social network. Influencers on TikTok get more engagement rates than users on other platforms. And unsurprisingly, brands and users want to advertise on the platform. In June this year, Bloomberg reported that TikTok was on track to triple its revenue to $12 billion in 2022 as it threatened its hold on Facebook’s dominance.
However, on November 10, the Financial Times reported that the company had slashed revenues by $2 billion as COVID restrictions in China continued to play spoilsport. That said, $10 billion in revenue for 2022 should have people lining up at its stock purchase counters.
TikTok has a very young userbase. 10-19 year-olds make up 32.5% of its users, 20-29 year—olds account for 29.5%, and 30-39 year-olds are 16.4%. An important point to note is that 40-49 year-olds make up 13.9%, and even 50+ people are 7.1% of TikTok. This data gives two key insights: TikTok users are aging up. They are unlikely to let go of the platform. And the second one is that older users also make up a significant part of its user base.
But one major red flag could put the brakes on TikTok: The potential of a US ban. TikTok has around 138 active monthly users in the US (the world’s most affluent market). If a ban comes into play, TikTok’s value will plummet.
Will TikTok Get Banned in the US?
Before we talk about TikTok’s future in the US, let’s examine what happened to the app in India. It was one of the most popular apps among the country’s youth. However, the Indian government banned the app in 2020 (and permanently banned it in January 2021) after Indian and Chinese soldiers got into an altercation at their borders. This incident has been cited as a precedent multiple times in the US.
Former US President Donald Trump had called for a ban on TikTok. He then said that if TikTok couldn’t be banned, it would have to let an American company buy its US operations. A federal court struck down this demand.
Why the hate against TikTok? That’s because many US lawmakers believe that TikTok is a proxy surveillance tool for China.
In June 2022, Brendan Carr, the US Federal Communications Commission, wrote to Apple CEO Tim Cook and Alphabet CEO Sundar Pichai in June this year, asking them to remove TikTok from the App Store and Google Play, respectively.
“TikTok is not what it appears to be on the surface. It is not just an app for sharing funny videos or memes. That’s the sheep’s clothing. At its core, TikTok functions as a sophisticated surveillance tool,” he said, adding, “India—the world’s largest democracy—has already banned TikTok on national security grounds for stealing and surreptitiously transmitting user data in an unauthorized manner.”
On November 29, South Dakota Governor Kristi Noem banned TikTok for state government. The press release said, “We will have no part in intelligence gathering for China, a nation that hates America. I hope other states quickly follow this example and protect the vital private information of our citizens.” You can read the complete statement on Twitter.
On December 8, the state of Indiana sued TikTok.
On December 13, the BBC reported that US lawmakers proposed a ban on TikTok, citing concerns about national security. TikTok called the measure a “politically-motivated ban that will do nothing to advance the national security of the United States.”
On December 23, CNBC reported that Congress passed a significant spending package, including a bill banning TikTok from being used on government devices.
While there are a lot of calls for a blanket ban on TikTok, it is unlikely that such a ban will come into effect. Several sites and apps collect the same data that TikTok does.
A complete ban on TikTok looks unlikely. Bytedance will likely wait for the uncertainty in China (concerning COVID cases) to settle before announcing its IPO date. Softbank’s investments could be performing better. Investing in its stock might not be the most brilliant move right now. We are not in a bull market now. 2022 has shown us that several hot stocks can suddenly crash. There are thousands of publicly traded companies that you can select for your investment choices. If you are looking for the best stocks to buy and have the money for pre-IPO platforms, you can invest in TikTok. If not, you can wait for it to go public.
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