It would force the firm to be more transparent, although it may be waiting for the sector to recover
TikTok’s Shou Zi Chew is in a tough spot. The CEO of the social networking app owned by the Chinese group ByteDance is trying to convince US authorities that he will protect the data of users in that country. But even if the proposed fixes pass the test of federal authorities – which is not certain – the company will have to face leaders of the activist states. The company’s best defense is to add some transparency through an IPO.
TikTok’s addictive short videos have made the app very popular among users and advertisers. They have also drawn scrutiny over their property. Although several US investors, including KKR and Tiger Global Management, have taken stakes in the $300 billion unlisted company, ByteDance, and its founder Zhang Yiming remain large shareholders.
ByteDance also allowed the Chinese government to take a special management stake in one of its subsidiaries in China at the end of 2019, Reuters reported in 2021. It’s an increasingly common feature as the People’s Republic exerts more control over tech companies. private.
This is a problem, given that trust between the Chinese and US authorities is at a rock-bottom. To make matters worse, ByteDance claimed late last year that some employees had improperly accessed TikTok user data from two journalists. Although those employees have since been fired, US lawmakers, including Democratic and Republican members of Congress, have been angered by the leak.
TikTok escaped an effective ban in the United States when President Joe Biden in 2021 repealed executive orders from his predecessor Donald Trump banning new downloads of the app. The company is now trying to work with the Committee on Foreign Investment in the United States to ease concerns about Chinese access to US customer data.
TikTok has proposed building a division with a separate board, including a former US security official, while the data is stored by Oracle in Texas, Reuters reported last year, citing sources familiar with the matter.
But even if TikTok is able to win over federal officials, state regulators may still get in the way. More than 40% of US states, including Wisconsin and Texas, have banned the app on state-owned devices.
A partial solution would be for TikTok to list its shares on a US Stock Exchange. That would force the company to be more transparent about its operations and financial results, while giving US investors the ability to take a direct stake in the company.
A public offering would not resolve the issue of Chinese government influence over TikTok parent, and could cause other headaches: VTC app Didi Global had to cancel its US IPO after the agency China’s Internet watchdog to launch a security investigation. TikTok may also want to wait for tech valuations to pick up. But if an IPO helps TikTok continue to operate in the United States, it’s worth a try.
