The Committee on Foreign Investments in the United States (CFIUS), a group of U.S. government experts that reviews foreign acquirer agreements for potential national security risks, has expressed concerns about the security of personal data that TikTok deals under its Chinese owner, Reuters previously reported.
Private company ByteDance has received a proposal from some of its investors, including Sequoia and General Atlantic, to transfer the majority stake in TikTok to them, the sources said. It has also sparked acquisition interests in TikTok from other firms and investment firms, the sources said.
The investor bid values TikTok at 50 times its expected 2020 revenue of around $ 1 billion, the sources say. By comparison, Snap is valued at 15 times its expected 2020 revenue, at around $ 33 billion, according to data provider Refinitiv.
It is not known whether ByteDance founder and CEO Yiming Zhang will be happy with the offer. Executives at ByteDance recently discussed TikTok’s valuation projections that exceed $ 50 billion, one of the sources said.
TikTok is growing rapidly as it makes more money from advertising, and its management team expects to hit $ 6 billion in revenue in 2021, one of the sources said. ByteDance, which has other apps, including TikTok’s Chinese counterpart, Douyin, has set a 2020 revenue target of around 200 billion yuan ($ 28 billion), Reuters previously reported.
ByteDance was valued at nearly $ 140 billion earlier this year when one of its shareholders, Cheetah Mobile, sold a small stake in a private deal, one of the sources said.
If a deal for all of TikTok cannot be reached, ByteDance plans to divest only TikTok’s US operations, one of the sources said. It’s unclear what such a deal would be worth and what ties TikTok in the United States would maintain with its global operations.
There is no certainty that ByteDance will agree to a deal, the sources say. It is moving forward with structural changes that will further limit TikTok’s U.S. activities from its global empire, the sources added. Those changes could include a new holding company for TikTok and an independent board of directors, one of the sources said, warning that no decision has been made. The company has already separated TikTok from its other applications operationally with dedicated teams.
The sources requested anonymity because the deliberations are confidential.
ByteDance, General Atlantic and Sequoia declined to comment, while Cheetah Mobile and a CFIUS spokesperson did not respond to requests for comment.
President Donald Trump and senior government officials have said they are considering a broader ban on TikTok and other China-related apps.
ByteDance acquired the Shanghai-based video app Musical.ly under a billion dollar deal in 2017 and relaunched it as TikTok the following year. About 70% of the equity ByteDance has raised from outside investors comes from the United States, according to one of the sources.