TikTok CEO Shou Chew's testimony before Congress last week has done little to assuage US security concerns surrounding the social-media company.
Yet it has shed new light on the fortune of one of the world's richest people: Zhang Yiming, the 39-year-old co-founder of ByteDance Ltd., TikTok's Chinese parent.
ByteDance's founders own about 20% of the company, Chew said in his testimony - a figure lower than reported estimates in recent years. That could put Zhang's wealth at $42.3 billion, based on the firm's $220 billion value from private trades revealed earlier this month, according to the Bloomberg Billionaires Index.
That estimate is down about $13 billion from September, when the world's biggest startup initiated a stock buyback that valued it at about $300 billion. Two years ago, Zhang could have been worth more than $60 billion - making him one of Asia's richest people - with investors willing to buy a piece at a valuation of almost $400 billion.
Beijing-based ByteDance has had to deal with issues beyond just higher interest rates and inflation, which have taken a toll on technology companies.
Its TikTok platform, where teenagers post dance and singing videos and small businesses promote their products, has amassed more than 150 million US users, leading to concerns about China's access to the data it gathers and the threat of a ban if it doesn't spin off from its parent.
Hostile Hearing
Chew last week sat through a hostile four-and-a-half hour congressional hearing in which he sought to protect the company.
"TikTok is caught in this geopolitical tug of war between the US and China as the clock ticks towards a US ban and forced sale," said Dan Ives, an analyst at Wedbush Securities in New York. "The fear is: US consumers start to grow weary of the China data issue, which has impacted the perceived value of TikTok. This is all a game of high-stakes poker."
Bloomberg's wealth index amended Zhang's net worth estimate to reflect the stated ownership and drop in ByteDance's valuation.
Shou Chew, during a House Energy and Commerce Committee hearing in Washington DC on Thursday, March 23, 2023.
Most of the founders' 20% stake belongs to Zhang, while co-founder Liang Rubo has about 1%, according to a person familiar with the matter. That would give Liang a $2.1 billion net worth.
Institutional investors hold 60% of ByteDance and employees own the remaining 20%, according to Chew's testimony.
Representatives for ByteDance didn't respond to a request for comment for this story.
More Power
While Zhang no longer manages ByteDance's daily operations, the founders' shares have weighted voting rights, a common practice in the industry, Chew said. That likely gives them more power to push through decisions.
Zhang stepped down as ByteDance CEO in May 2021 and quit its board the same year, leaving both positions to Liang, 40, his college roommate.
Founded in a four-bedroom apartment about a decade ago, ByteDance's valuation has since surged at least 11 times. TikTok, along with its Chinese twin app Douyin, is the company's crown jewel and has inspired homegrown upstarts like retailers Shein Group and PDD Holdings Inc.'s Temu to carve out a place in the US's still fast-growing mobile-internet arena.
Their pursuit for new growth comes after two years of endless regulatory crackdowns and Covid restrictions that disrupted consumption and chilled founders and investors at home. Like many of its rivals, ByteDance was forced to curtail some of its riskier expansion projects - including in gaming and venture investment - under Beijing's intensified scrutiny.
But the mounting US concerns over China's influence have taken a toll on ByteDance.
While Chew stressed that TikTok has committed $1.5 billion to strengthening controls over its user data security, the firm's leadership is considering separating from its Chinese parent, though that would be the last resort, people familiar with the matter have said. Bloomberg Intelligence estimates the US business could be worth $40 billion to $50 billion alone.
Any TikTok sale or spinoff would amount to a technology export and require administrative approvals from China, a spokeswoman for the nation's Ministry of Commerce told reporters before last week's testimony.
ByteDance itself is unlikely to give up its US arm easily given that its algorithm is the basis for its lucrative business and TikTok probably has a shared code base with the group's other apps, according to BI analysts Mandeep Singh and Damian Reimertz.
That means ByteDance - and Zhang - may have more tough times ahead.
"Amid increased scrutiny around data capture, even within its own app, TikTok may remain at a product disadvantage versus its rival social-media platforms in the US," Singh and Reimertz wrote in a note Wednesday.
