TikTok has nearly 80 million users in the United States alone and it’s one of the most popular social media platforms globally. As the service expands its global reach, it commands 1 billion active monthly users.
There will always be a broad range of topics in the community, including information for younger investors who use TikTok to do stock and crypto research. Like other popular unlisted companies such as Epic Games and Hulu, unfortunately, TikTok stock is not available to buy however, we’ll come back to this in a moment.
TikTok is known for short videos of dancing and skits interspersed with music, and in addition, people post investing ideas on it. In 2021, the New York Times described TikTok as a hub of information for the next generation of investors.
Moreover, this kind of community can be very engaging for young and budding Gordon Gekkos, who can learn all about trading from their peers. At least you won’t have to read stale books about finance, which, if you’re short on time, is an attractive proposition.
That said, there need to be some big risk warnings around this kind of advice – there are some instructive and entertaining YouTube videos about some of the most well-known TikTok trading strategies, and as you might have guessed they’re flawed.
Here are five other things you should know about investing in TikTok.
ByteDance (TikTok Stock) Is Not Publicly Traded
At present, ByteDance – the company behind TikTok – does not trade publicly. Moreover, ByteDance has made no indication regarding when it may list or how the recent dispute between the United States and China may affect a possible listing in the future.
Those unfamiliar with ByteDance are unaware that it is a Chinese multinational internet technology company that produces and owns a variety of products and services, including the application TikTok, which is arguably their most popular product.
Millennials and Generation Z have become very popular with TikTok, a short-form video application. In addition to the app’s ease of use, it’s the ability to create and share content effortlessly, the ‘fun factor’ of the app, and several stars who drive traffic to the platform.
According to Wallaroo, a consultancy firm that quantifies its popularity, TikTok has:
- Active monthly users: 800 million
- Downloads totaling over 2 billion
- With an average of 52 minutes spent per day on the app, the app has a highly engaged user base. Approximately 8 times per day, users open the app.
TikTok is a video-sharing platform with a solid creative culture; 83% of its users have posted videos in the past
To make it more specific, TikTok’s parameters are:
- Active users: 80 million
- divided by gender with 60% females and 40% males.
- The number of online visitors in April was 39.2 million
- 130 million apps were downloaded in the first quarter of FY 2020
Although ByteDance and, by extension, TikTok is very popular, they both remain unlisted. Ultimately, this means that investors and traders do not have an easy way to speculate on the company, and there is no clear or transparent valuation available to the general public.
Where Can I Purchase And Sell ByteDance (TikTok stock)?
The ByteDance (TikTok) gray market will expose investors to the IPO before the company lists. Investors can trade contracts for difference (CFDs) on the predicted market capitalization of the company before the IPO by using IG’s ByteDance (TikTok) gray market.
According to our forecast of ByteDance’s market cap at the end of the first trading day, IG’s gray market price is based on this prediction.
The gray market, for example, allows you to take advantage of disparities in the estimate of the company’s value before the shares are publicly listed on the stock exchange. To get started with trading the ByteDance gray market (TikTok), please follow the steps below:
- Create a trading account or sign in to your account to access our trading platform
- Select whether you would like to trade CFDs
- Look up “ByteDance”
- Select the size of your position
- Monitor your position and open a position
As noted above, in addition to trading the company long, the ByteDance gray market allows traders to trade both long and short of the company before its possible IPO.
- Short ByteDance before the initial public offering:
- Access our trading platform by creating or logging into your trading account
- Look up ‘ByteDance’
- Select the size of your position
- Speculate on the price falling by selecting “sell” in the deal ticket
- Ensure that you are monitoring your short position
As a reminder, should ByteDance potentially become a public offering, you will be able to trade it like any other stock through IG’s share trading platform. Even though there have been rumors about the company’s potential listing over the last year – with some speculating that ByteDance would list in Hong Kong or Shanghai – none of these rumors have been confirmed by ByteDance.
What Is the Return on Investment For ByteDance (TikTok)?
ByteDance has attracted high-profile investors over the last few years due to TikTok’s explosive growth and its other core products.
CrunchBase lists ByteDance’s funding rounds as 9 and a total of US$7.4 billion. According to the Wall Street Journal, ByteDance boasted an implied value of US$90-100 billion in its latest funding round – led by Tiger Global Management.
Sequoia Capital China, Goldman Sachs, Softbank, Morgan Stanley and are some of ByteDance’s early investors.
In 2020, the government became more critical of ByteDance after the financial firms thought it was a good investment.
Security concerns have been cited as a key issue by both the USA and India about ByteDance, and its apps are configured. TikTok, like many Chinese apps, has been outright banned in India, but the United States has taken a different approach by forcing ByteDance to auction its US operations.
Then US President Donald Trump said in an executive order in 2020 that there is credible evidence that ByteDance Ltd might do something that threatens the national security of the United States if it acquires all the musical.ly interests. According to this order, Tik Tok had to sell its US operations. Oracle, Microsoft, Wal-Mart, and Twitter are vying to buy ByteDance’s US TikTok operations.
Bloomberg reports that the Chinese government would need to approve any sales, which may prolong the timeline of the sale process.
What Makes TikTok Money?
Aside from those regulatory issues, ByteDance’s TikTok makes its money primarily from advertising like most other social media companies like Facebook, Twitter, and SnapChat.
TikTok boasts a significant user base – especially if the goal is to reach a young demographic – making advertising through the platform an obvious choice. There are five types of TikTok ads available to advertisers, including in-feed ads, TopViews, hashtag challenges, and effects.
According to Reuters, ByteDance’s revenue doubled during the first quarter of fiscal 2020 as advertisers flock to the company’s many offerings.
ByteDance ended March 2020 with annual revenue of $5.64 billion (*40 billion yuan) – demonstrating a 130% increase.
TikTok: What’s Next?
TikTok and ByteDance are currently in a highly fluid state. As of today, ByteDance’s US TikTok operations have no apparent buyer, and any deal would need the approval of the Chinese government.
The legality of a forced TikTok sale in the US has also been questioned – adding to the uncertainty.
In addition, it is difficult to predict how ByteDance would be valued without its TikTok US operations: would it have a positive or negative impact? Is TikTok overvalued?
Some say no. TechCrunch reported that following the US moves against ByteDance, the company has pushed to focus on China, where Do Yin and Toutiao have saturated the market.
Since the ByteDance gray market price reflects real-world events, the sale of TikTok’s US operations may result in steep volatility in the gray market price of ByteDance (TikTok) in both directions.
Disclosure: The author is not a licensed or registered investment adviser or broker/dealer. They are not providing you with individual investment advice. Please consult with a licensed investment professional before you invest your money.
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Tim Thomas holds no positions in the stocks, ETFs, mutual funds, forex, or commodities mentioned.
This post was produced and syndicated by Tim Thomas / Timothy Thomas Limited.
Featured credit image: Pexels.