TikTok stock is owned by ByteDance Limited, a privately-held Chinese Startup part-funded by Sequoia Capital China. But due to 2020 US government security-driven actions, both Walmart & Oracle will share a 20% stake in TikTok Global, which provides a unique chance for investors to buy shares of TikTok.
Is TikTok on the Stock Market?
There are no TikTok shares on the stock market because ByteDance Limited, TikTok’s owner, is privately held. ByteDance has plans for a TikTok Global initial public offering (IPO) in the United States, but they have announced no date for the IPO. Plans call for a pre-IPO funding round that will leave ByteDance with 80% of the TikTok Global stock.
How to Buy TikTok Stock
You can buy stock in the two American companies that will own 20% of TikTok Global, Walmart, and Oracle. Oracle will own 12.5% of TikTok Global, and Walmart will own 7.5% under present plans.
Analysts estimate TikTok Global’s valuation at a minimum of $60 billion. TikTok Global is a proposed U.S. company that will own TikTok’s North American operations.
They are forming TikTok Global because U.S. President Donald J. Trump (R-Florida) threatened to ban TikTok in the United States. Trump thinks TikTok’s algorithms threaten US national security. Trump is suspicious of TikTok because ByteDance is based in China.
American business enterprise software provider Oracle (ORCL) will own 12.5% of TikTok Global, and retail giant Walmart (WMT) will own 7.5% of TikTok Global. They could base TikTok Global in Texas, and Instagram co-founder Kevin Systrom could become its CEO.
Does TikTok have a stock name?
There is a TikTok stock name TikTok Global. TikTok Global will only own TikTok’s operations in North America, Australia, and a few other regions.
ByteDance will own the rest of TikTok, including the Chinese operations. ByteDance is privately-held and has no plans for an IPO.
There has been speculation that ByteDance could hold an IPO on the Hong Kong or Shanghai stock markets. They have announced no plans for a ByteDance IPO.
Is TikTok on the Stock Market?
It is not confirmed 100% if TikTok will float on the stock market. Many details of the TikTok Global IPO, including the exchange the stock will trade on, and the ticker symbol, are unknown. However, some Chinese companies, including Alibaba (BABA), trade on the New York Stock Exchange. Thus I think TikTok Global could trade on the NYSE in the future.
Who Owns TikTok Stock?
ByteDance – 80%
TikTok stock is owned by ByteDance Limited, a privately-held Chinese Startup part-funded by Sequoia Capital China. Part of ByteDance’s operations involving the TikTok operations in North America will be sold to two corporations.
Oracle – 12.5%
Business enterprise software provider Oracle (ORC) will pay a 24₵ quarterly dividend on October 22, 2020. “Oracle will quickly deploy, rapidly scale, and operate TikTok systems in the Oracle Cloud,” said Oracle CEO Safra Catz in a press release. “We are 100% confident in our ability to deliver a highly secure environment to TikTok and ensure data privacy to TikTok’s American users.”
Oracle is a profitable company that reported a quarterly operating income of $3.211 billion and a quarterly gross profit of $7.487 billion on August 31, 2020. Oracle also reported quarterly revenues of $9.367 billion on the same day. Oracle is a cash-rich company with $42.279 billion in cash and short-term investments on August 31, 2020.
Wallmart – 7.5%
Walmart (WMT), America’s largest retailer, is a popular value investment that will pay a 54₵ quarterly dividend on January 4, 2021. However, many investors, including Warren Buffett, believe Walmart is losing America’s retail wars to Amazon (AMZN). Walmart will invest in TikTok Global to use TikTok’s algorithms to upgrade its e-commerce capabilities.
Walmart makes enormous amounts of money from its gigantic business. Walmart reported quarterly revenues of $137.742 billion and $35.053 billion in quarterly gross profits on July 31, 2020.
Walmart’s business generates enormous amounts of cash. Walmart reported a quarterly operating cash flow of $11.939 billion on July 31, 2020. Walmart had $16.906 billion in cash and short-term investments on the same day.
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TikTok Background & Company Information
TikTok, a video-sharing app, is one of the most popular media products on Earth. TikTok is one of the fastest-growing social media apps.
TikTok is one of the world’s most successful and popular apps, even though it is just four years old ByteDance released the App in 2016. Mark Zuckerberg began Facebook in 2004, in contrast.
Over two billion people have downloaded TikTok from the App Store and Google Play. TikTok is the most downloaded app in the Apple App Store. Over 33 million people downloaded TikTok from the App Store in the first quarter of 2019. Oberlo estimates that there are 800 million TikTok users worldwide.
ByteDance, TikTok’s owner, claims the app has 100 million monthly active users and 50 million active daily users in the United States. ByteDyance also claims TikTok’s active monthly user base grew by 800% between January 2018 and August 2020.
TikTok AI & Algorithms
Analysts think ByteDance powers TikTok with some of the world’s most sophisticated Artificial Intelligence (AI). The AI is why Microsoft (MSFT) tried to buy TikTok’s North American operations in August. Analysts consider the AI the secret ingredient in TikTok’s recipe for success.
Many people, including U.S. President Donald J. Trump (R-Florida), think TokTok is a security threat because the AI gathers massive amounts of data about users. The government of India briefly banned TikTok as a security threat in 2019.
The data TikTok gathers could be full of valuable customer information. Walmart (WMT) is buying 7.5% of TikTok Global to get access to that data.
Why is TikTok so Valuable?
A ByteDance press release claims TikTok’s American user base grew from 11.263 million in January 2018 to 100 million in August 2020. The largest TikTok user base is in India, where the app had 611 million users in 2020.
Another 150 million people use Douyin, the Chinese version of TikTok, each day. Oberlo claims that 41% of people between 16 and 24 worldwide use TikTok. TikTok operated in 155 countries worldwide in 2019.
Many people consider TikTok addictive because 90% of users claim to use the app daily. TikTok retains users at a rate of 26%, the Business of Apps claims. If the Business of Apps is correct, one out of four people who use TikTok become regular users.
The average user spends 52 minutes on TikTok each day, Oberlo claims. Users view over one billion videos on TikTok every day. Android users spent 68 billion minutes on TikTok in 2019, The Business of Apps estimates.
TikTok’s Valuable Algorithms
Analysts believe TikTok’s most valuable asset is a machine-learning platform that uses algorithms to track and identify the videos users want to watch. The algorithm identifies the videos that users are most likely to watch.
Some analysts think advertisers could use TikTok’s algorithm to market products to young people who tune out all other advertising. TikTok could show a young person who enjoys watching auto videos, footage of the latest model cars, for example.
Some analysts think ByteDance could use TikTok’s algorithm to identify products that customers want to buy. TikTok could send videos about hardware or tools to people who watch how-to videos for home improvement projects.
Chinese officials think TikTok’s AI and Algorithms are so valuable that they could block ByteDance from selling the technology to an American company. However, ByteDance is moving forward with the TikTok Global deal. That indicates ByteDance could have the Chinese government’s permission to export its technology.
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Why Does Walmart Want TikTok?
Walmart (WMT) could use TikTok’s algorithm to learn which groceries customers buy each week, New York University Marketing Professor Scott Galloway speculates. Walmart could ship those products straight to customers and eliminate the ordering process.
Instead of marketing products, Walmart could offer customers a subscription to a service. The algorithm-operated service will ship customers the products they regularly buy and eliminate the need for shopping. Eliminating shopping could help Walmart make more money by reducing its expenses.
Galloway thinks Walmart plans to buy 7.5% of ByteDance’s American subsidiary TikTok Global to get access to TikTok’s algorithms. Galloway believes Walmart management plans to add TikTok algorithms to its Walmart.com eCommerce platform.
TikTok Global’s Value
ByteDance Ltd estimates TikTok’s value at $60 billion. Investors, however, estimate ByteDance itself could be worth $100 billion.
ByteDance generated $17.20 billion in revenue in 2019, TechCrunch claims. TechCrunch claims most of ByteDance’s revenue comes from Chinese advertising sold on Doyuin and other apps.
TikTok Global will not own Doyuin or share in its revenues. Thus, there is no evidence TikTok Global will make money. TikTok Global could make money by selling its algorithms to other companies.
Analysts estimate TikTok Global’s valuation at $60 billion. TikTok Global is a proposed U.S. company that will own TikTok’s North American operations. ByteDance will own 80% of TikTok Global.
Companies like TikTok you can invest in
There are publicly-traded companies similar to TikTok Global and ByteDance you can invest in now. Several social media companies offer similar products to TikTok Global.
Some of those social media companies are proven money makers, unlike TikTok Global.
Tencent Holdings ADR (OTCMKTS: TCEHY)
TikTok was not the first Chinese-owned social media app banned in the United States. President Donald J. Trump (R-Florida) banned the social messaging solution WeChat on August 6, 2020. WeChat had 1.203 billion monthly active users in the second quarter of 2020.
The publicly-traded Chinese company Tencent Holdings ADR (OTCMKTS: TCEHY) owns WeChat or Weixin. Statista estimates that WeChat is the world’s fifth-largest social media solution.
CNBC claims that WeChat accounts for 30% of mobile internet use in the People’s Republic of China. Tencent claims over 300 million people used WeChat Health to get information about coronavirus in 2020.
One of WeChat’s most valuable properties is the payment app WeChat Pay. WeChat Pay processed one billion daily transactions in December 2018, China Internet Watch estimates. WeChat Pay had 1.098 billion users in December 2018. WeChat Pay operates a cross-border payment service that serves one million merchants in the People’s Republic of China in 2019.
WeChat Pay launched a centralized clearing and settlement system and moved all its cash to the People’s Bank of China (PBOC) accounts in January 2020. The PBOC is the central bank of the People’s Republic of China.
Tencent holds a significant stake in Snap Inc. (NSYE: SNAP), the owner of the American photo-sharing app Snapchat.
Tencent is a major player in gaming; it owns 40% of Epic Games, the owner of the popular and addictive massive multiplayer online game (MMOG) Fortnite. Tencent also owns 93% of Riot Games, the owner of Fortnite’s biggest rival, MMOG League of Legends.
Tencent owns 80% of Grinding Gears, the developer of Planet of Exile, 11.5% of BlueHole, the developer of PlayerUnknown’s Battlegrounds (PUBG), and a majority of Supercell. Supercell developed the mobile game hits Clash of Clans and Clash Royale.
Tencent Holdings reported annual revenues of 339.777 million Yuan in 2019. Tencent also reported an annual operating income of 84.127 billion Yuan and an annual gross profit of 149.578 billion Yuan in 2019. Plus, Tencent Holdings reported an annual operating cash flow of 148.590 billion Yuan and an annual free cash flow of 66.313 billion Yuan in 2019.
Tencent Holdings (TCEHY) is a proven moneymaker which an impressive portfolio of holdings. Many investors will find Tencent Holdings morally objectionable because of its close connections with the Chinese Communist Party.
Snap Inc. (NYSE: SNAP)
Snap (SNAP) owns the popular video and photo-sharing app Snapchat, which some observers consider a direct competitor to TikTok. Snapchat’s user base is much smaller than TikTok’s.
Snapchat had 238 million daily active users in the 2nd Quarter of 2020, Statista estimates. Snapchat’s daily active user base grew from 203 million in the 2nd Quarter 2019.
Snap is an American company, unlike ByteDance, so President Trump may not see Snapchat as a security threat. All of Snap’s intellectual property is presumably in American hands. That could add value to SNAP.
However, Tencent Holdings owns a significant stake in Snap Inc. President Trump labeled Tencent’s WeChat from the United States and banned it in August 2020.
Snap loses money; it reported a quarterly operating loss of -$310.61 million on June 30, 2020. However, Snap reported a quarterly gross profit of $203.7 million and quarterly revenues of $454.16 million on the same day.
Instead of generating cash flow, Snap burns cash. Snap Inc. reported a negative quarterly operating cash flow of -$66.55 million on June 30, 2020. Snap reported a $350.38 million quarterly ending cash flow on June 30, 2020. Snap had $2.83 billion in cash and short-term investments on June 30, 2020.
I think Snap borrows money to finance its operations because it reported a quarterly financing cash flow of $909.06 million on June 30, 2020. Snap is a poor investment because it loses money.
Twitter Inc. (TWTR)
The American microblogging app Twitter (TWTR) is President Donald J. Trump’s (R-Florida) favorite playtoy.
Twitter is also American journalists and celebrities’ favorite social media. Twitter has become the most popular channel for the broadcasting of breaking news in the United States.
Twitter had 330 million monthly active users and 145 million daily active users in 2019. Twitter has had serious problems, including allegations that it spreads political propaganda and hate speech. There have been allegations of harassment on Twitter.
Twitter has a serious fraud problem. Twitter management admits to removing 70 million fake accounts in 2019.
Twitter loses money. It reported a quarterly net loss of -$1.378 billion and a quarterly operating loss of -$273.93 million on June 30, 2020. Twitter reported a quarterly gross profit of $395.4 million and quarterly revenues of $683.44 million on June 30, 2020.
Twitter is generating some cash. It reported a quarterly operating cash flow of $201.02 million on June 30, 2020. Twitter reported a negative operating cash flow of -$356.67 million on June 30, 2020. Twitter had $7.766 billion in cash and short-term investments on June 30, 2020.
Facebook (NASDAQ: FB)
Facebook (FB) operates the largest social media ecosystem in the world. Facebook owns four of the top social media platforms in the world.
Statista estimates Facebook’s flagship social media app had 2.603 billion users in July 2020. The Facebook-owned encrypted-messaging solution WhatsApp had two billion users in July 2020.
Facebook Messenger had 1.3 billion users in July 2020. The photo and video sharing solution Instagram had 1.082 billion users in July 2020.
Facebook has serious problems, including allegations of violating antitrust laws. Facebook faces allegations that it spreads political propaganda and hate speech. Critics have even accused Facebook of promoting genocide and terrorism.
Facebook makes enormous amounts of money, unlike other social media companies. Facebook had $58.24 billion in cash and short-term investments on June 30, 2020. Facebook reported a quarterly operating cash flow of $3.877 billion and a negative quarterly ending cash flow of -$2.358 billion on June 30, 2020.
Facebook reported a quarterly operating income of $5.963 billion, a gross quarterly gross profit of $14.858 billion, and quarterly revenues of $14.687 billion on June 30, 2020.
Many investors dislike Facebook (FB) stock, despite the cash it generates. One reason investors avoid Facebook is that it is a cash-rich company that pays no dividends.
Investing in Social Media
Making money on social media is difficult. Of the publicly-traded social media companies surveyed here, only Facebook (FB) and Tencent Holdings (TCEHY) make money.
Many people will assume TikTok Global will not make money because of the track record of companies such as Snapchat (SNAP) and Twitter (TWTR). Some observers, including the management teams at Microsoft (MSFT), Walmart (WMT), Oracle (ORC), and ByteDance, think otherwise.
It could be years before Oracle and Walmart’s investment in TikTok Global investment pays off. Oracle and Walmart can afford to wait for years to get a return on their TikTok Global investment.
Investors who need stocks that pay need to avoid all social media companies except Facebook (FB). So-far only Facebook has made money in social media in the United States.
Only time will tell if TikTok Global will change that reality and create a credible Facebook competitor.