TikTok Ceo's Testimony Reveals Founder's Fortune Was Down $17.3 Billion

The testimony of TikTok CEO Chew Shou Zi before Congress two weeks ago did little to allay American fears about the social media company's security.

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But, it has revealed fresh information on Mr. Zhang Yiming, the 39-year-old co-founder of ByteDance, TikTok's Chinese parent company, who is one of the richest individuals in the world.

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According to Mr. Chew in his evidence, the founders of ByteDance hold around 20% of the company, which is less than previous estimates.

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Based on the US$220 billion worth of the company from private trades disclosed earlier last month, according to the Bloomberg Billionaires Index, this may place Mr. Zhang's fortune at US$42.3 billion (S$56.3 billion).

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This estimate has decreased by around US$13 billion (S$17.3 billion) since September when the biggest start-up in the world started a stock buyback that gave it a US$300 billion valuation.

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When investors were ready to buy a piece at a valuation of about US$400 billion two years ago, Mr. Zhang may have been worth more than US$60 billion, making him one of Asia's wealthiest individuals.

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In addition to increasing interest rates and inflation, which have had an impact on IT firms, ByteDance has had to contend with other problems.

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With more than 150 million American users on its TikTok platform, where teens upload dancing and singing videos and small companies advertise their goods, there are concerns about China's access to the data the app collects. If it does not separate from its parent, there is also the danger of a ban.

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Hostile Hearing

Mr. Chew endured a harsh 412-hour congressional hearing on March 23 to safeguard the firm.

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"TikTok is trapped 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 New York-based Wedbush Securities. "The concern is that American users are becoming tired of the Chinese data issue, which has harmed TikTok's perceived value." This is all a high-stakes poker game."

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The index updated Mr. Zhang's net worth estimate to reflect his reported shareholding and the reduction in ByteDance's valuation.

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According to an individual involved with the situation, Mr. Zhang owns the majority of the founders' 20% ownership, while co-founder Liang Rubo has roughly 1%. This would give Mr. Liang a net worth of $2.1 billion.

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According to Mr. Chew's statement, institutional investors control 60% of ByteDance and employees own the other 20%.

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While Mr. Zhang is no longer in charge of ByteDance's day-to-day operations, the founders' shares have weighted voting rights, which is a normal practice in the sector, according to Mr. Chew. This presumably provides them with more clout in making decisions.

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Mr. Zhang stepped aside as CEO of ByteDance in May 2021 and left the board the following year, leaving both roles to Mr. Liang, 40, his college roommate.

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ByteDance's worth has increased at least 11 times since it was formed in a four-bedroom apartment around a decade ago. TikTok is the company's crown jewel, coupled with its Chinese counterpart app Douyin.

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Under Beijing's increased monitoring, ByteDance, like many of its competitors, was compelled to scale back some of its riskier development ventures, including gaming and venture to invest.

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Yet, growing American fears over China's influence have taken their toll on ByteDance.

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While Mr. Chew emphasized that TikTok has invested US$1.5 billion to tightening controls over its user data protection, those familiar with the subject say the company's leadership is considering splitting from its Chinese parent, albeit this would be a last choice.

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According to Trade Algo, the US business alone may be worth $40 billion to $50 billion.

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Any TikTok sale or spin-off would be considered a technological export and would need administrative clearances from China, according to a representative for the country's Ministry of Commerce.

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According to analysts, ByteDance is unlikely to give up its American arm simply because its algorithm is the foundation of its successful company and TikTok presumably has a common code base with the group's other applications.

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This implies that ByteDance - and Mr. Zhang - may face further difficulties in the future.

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"Amid rising scrutiny around data gathering, even within its app," the analysts said in a report last Wednesday, "TikTok may continue at a product disadvantage vs its competitor social networking platforms in the US." 

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