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How much is TikTok worth in the US? From 20 to over 100 billion dollars

Now that President Biden has signed legislation mandating the sale of TikTok's US assets, any potential deal raises a big question: "How much is the popular video-sharing app worth?" The hypotheses in the field

25 April 2024

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Now that President Biden has signed the law mandating the sale of TikTok's US assets, any potential deal raises a big question: "How much is the popular video-sharing app worth?"

Those who wonder about it have to consider huge and very different figures. One suitor has suggested $20 billion as a starting price for the US operations. Executives at TikTok's parent company, ByteDance, have already considered that TikTok's global operations are worth about half of the Chinese company's total value, which would bring it to more than $100 billion, according to people familiar with the matter.

Establishing the exact value will be difficult because the technology industry has never seen a sale like this before and there are several unknowns.

The value depends on what is for sale

An important factor is the content of the sale. Would it be the entire international business, with over a billion users, or just the US business, with 170 million users? Would the secret sauce of TikTok - the addictive video customisation algorithm that China has said it will not sell - be included?

Another question concerns the attractiveness of TikTok's business in the US as its once dizzying growth slows and Instagram emerges as a rival.

It will probably take months or more to establish a sale price, if it ever comes to that. President Biden signed the law on Wednesday after Congress had passed it in recent days. TikTok is preparing to sue on free speech grounds to prevent implementation of the law. The law gives ByteDance up to a year to find a suitable buyer or face a US ban.

The other hypothesis: TikTok accepts the ban

Further complicating a potential sale is the fact that ByteDance founder Zhang Yiming could theoretically allow TikTok to be banned in the US, although outside investors also have a say.

Zhang owns 20 per cent of ByteDance, according to the company, although the super shares gave him more voting rights. About 60 per cent of ByteDance is owned by global institutional investors, including Carlyle Group, General Atlantic and Susquehanna International Group. The remaining 20% is owned by the company's employees.

So far, public declarations of interest in buying TikTok have been limited. Kevin O'Leary, chairman of O'Shares ETFs and star of the television programme 'Shark Tank', has stated that he is preparing an offer worth between $20 billion and $30 billion, without the algorithm. Former Treasury Secretary Steven Mnuchin has said he wants to form a group to buy TikTok, and Bobby Kotick, the former CEO of video game publisher Activision, has also approached Zhang, the Wall Street Journal reports.

Legge Usa anti-TikTok, ByteDance promette battaglia legale

Should Zhang and the other shareholders agree to sell, the starting price for ByteDance could exceed USD 100 billion. ByteDance executives said last year that TikTok could be valued at up to half the valuation of ByteDance, according to people familiar with the matter.

Market analyses

In December, ByteDance offered $160 per share to buy back shares from shareholders, telling them it implied a valuation of $268 billion.

Other investors believe ByteDance is worth less. In private equity markets where ByteDance shareholders have sold their shares, prices have been less than $130 per share, according to data from Rainmaker Securities, a private equity brokerage. This would be equivalent to valuing the Chinese technology giant at less than $215 billion.

Moreover, there is no consensus on whether TikTok is actually worth half of ByteDance, which runs several popular applications in China.

Some investment banks and investors value TikTok at five times its advertising and livestreaming revenues, according to people familiar with the matter. Last year, TikTok's revenue from advertising and livestreaming, its main sources of income, was about $22 billion. This suggests that TikTok could be valued at $110 billion.

These starting points assume that ByteDance sells all of TikTok instead of dividing it into two businesses: one for the US and one for the rest of the world.

America is TikTok's largest market and an important growth engine. The US company launched an e-commerce service in September and aims to reach $17.5 billion in business transactions this year, according to people familiar with the matter.

TikTok in the US

TikTok's US business is meeting its ad sales targets, but user growth has stalled, the Journal reported last month. The average monthly US user age 18-24 declined by almost 9% from 2022 to 2023, according to mobile analytics firm Data.ai. Sensor Tower, an analytics firm, estimates that daily time spent on Instagram grew by 10% over the past year, compared to a 1% growth on TikTok, although TikTok still dominates social media platforms in terms of overall time spent on apps.

It is also unclear whether TikTok is profitable. In a March 2023 interview, TikTok CEO Shou Zi Chew said the company is not yet profitable because it is spending billions of dollars trying to separate its US and European operations from China, in an attempt to appease politicians and regulators concerned about the app's ties to Beijing.

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The sale of the US business alone would allow ByteDance to keep most of TikTok, but Chew said this could 'destroy' the application. Part of the appeal of TikTok, he said, is that people outside the US can experience America. "An American user can go viral in France, for example," he said. "If there were two companies, one for the US and one for the rest of the world, you could think about how to interoperate. How to do that?"

Another issue that could reduce the sale price of TikTok is the control of the app's algorithm, i.e. the system that customises the videos viewed by users. Last year, China stated that the sale of TikTok would be subject to government approval, as the algorithm falls under China's export control regulations.

ByteDance believes that the algorithm is critical to making TikTok engaging and fun, as investors and company executives have stated. Buyers may have to bid for TikTok without the algorithm and install their own system.

"You have to be an administrator to go from TikTok China to TikTok U.S.," Shark Tank's O'Leary told CNBC last month. "Everyone assumes you're not going to get the algorithm from the Chinese government, and there's no doubt they're not going to sell it."