Chinese company ByteDance targets Hong Kong IPO despite tech crackdown

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ByteDance, the owner of the short video app TikTok, has relaunched an IPO plan despite growing regulatory aggression targeting Chinese tech companies, aiming to list in Hong Kong by early next year.

The Chinese group, which raised about $ 5 billion in December for a valuation of $ 180 billion, plans to join either in the fourth quarter of this year or in early 2022, said three people with knowledge of plans to the company.

After postponing its overseas listing this year, ByteDance has spent the last few months responding to data security concerns from Chinese regulators, one of the people said, including providing more details to authorities on how it stores and manages consumer information.

“We are awaiting the last directives from ByteDance in September. They are submitting all the files to the Chinese authorities right now and going through the review process, ”the person added. ByteDance declined to comment.

ByteDance, whose TikTok video app is incredibly popular in the West, shelved its overseas list project, most likely in the United States, this year after Beijing stepped up a months-long crackdown on the biggest technology groups nationwide for alleged data security and monopoly breaches. laws.

Chinese authorities have promised tighter oversight of overseas lists as part of the government’s focus on national security.

ByteDance’s decision to suspend its initial public offering earned it more goodwill than Didi Chuxing, the Chinese ridesharing app, which sued with a $ 4.4 billion New York listing in June despite concerns from the The country’s Internet regulator regarding its data security practices, one of the people added.

China’s Cyber ​​Security Administration announced an investigation into Didi almost immediately after its IPO, while its main app was to be removed from Chinese app stores.

The regulator then issued rules requiring any business with more than one million users to pass a data security exam before being approved for overseas registration to ensure that sensitive user information cannot not be obtained by foreign regulators.

ByteDance was “in meetings similar to those of Didi and Full Truck Alliance” with cybersecurity regulators in China, according to a person close to the company. A truck haulage company, Full Truck Alliance, is also under investigation after being listed in the United States in June.

After the meetings, ByteDance “decided not to continue with a list in New York,” the person said.

People have warned that the plan could still change given the rapidly changing regulatory environment for Chinese tech groups. Shares of TikTok rival Kuaishou fell nearly 12% on Friday after state media called for tighter regulation of internet videos.

ByteDance’s path to a public list has already suffered several setbacks.

The reluctance to register earlier this year was also due to the departure of founder Zhang Yiming in May.

ByteDance has also struggled with national security concerns on the US side. Last year, the company agreed to list TikTok on a U.S. stock market following a proposed partnership deal with U.S. software group Oracle, in part to meet demands from the Trump administration.

But the deal, which involved selling TikTok’s US operations to Oracle, was put on hold after Donald Trump left the White House.

The Biden administration said in February it was reviewing its predecessor’s efforts to ban TikTok in the country.

ByteDance had mentioned a list in New York as early as 2019 but has since set its sights more firmly on Hong Kong, according to people familiar with the matter.

The plan was vindicated this year after China cracked down on overseas registrations. “We say to clients, if you are a Chinese company of any size, focus on an IPO in Hong Kong, forget about the United States for now,” said a senior partner at a law firm. business.

ByteDance more than doubled its revenue last year to over $ 34 billion, making gross profit of $ 19 billion. It has around 1.9 billion monthly active users.

Additional reporting by Ryan McMorrow in Beijing