How to Invest in TikTok in 2024

Investing in TikTok isn't as straightforward as investing in other popular social media companies. The popular short-form video app is owned by the Chinese company ByteDance, which doesn't trade publicly on any stock exchanges. But there's a way to get a piece of the action in one of the fastest-growing digital media platforms in the world. Here's what you need to know if you're interested in investing in TikTok.

Is TikTok publicly traded?

Is TikTok publicly traded?

TikTok is owned by a Chinese tech company called ByteDance, Ltd. Its stock doesn't trade publicly on any exchanges. Accredited investors may be able to buy shares directly from existing owners through private equity exchanges, but without wide access on a public market, negotiating pricing and finding liquidity will be difficult.

The prospects for a ByteDance or TikTok initial public offering (IPO) anytime soon grew a bit dimmer in late 2022. Amid slow progress on the IPO, ByteDance bought back $3 billion in shares at a $300 billion valuation to allow early investors to cash out some of their equity without an IPO. In late 2023, ByteDance offered to buy back stock from shareholders for $160 per share, valuing the company at $223.5 billion.

How to invest in TikTok

Two best ways to invest in TikTok

Getting access to a private market with someone offering to sell ByteDance shares at a price you're willing to pay isn't easy -- or even possible -- for most investors. However, two publicly traded investment companies hold shares of ByteDance, and anyone can buy shares in them.

1. KKR

KKR is one of the world's oldest alternative asset investment management firms. Its investments range from private equity, like ByteDance, to energy, infrastructure, real estate, credit, and hedge funds.

KKR originally invested in ByteDance, along with Softbank and General Atlantic, in 2018. At the time, the Chinese company was valued at $75 billion. It added to its position in another funding round at the end of 2020, valuing the company at $180 billion.

But ByteDance is just a small portion of the firm's overall portfolio. It has more than $500 billion in assets under management, including $174 billion in private equity investments.

Although KKR has a great track record of producing returns for investors, it's important to note that investing in KKR differs from investing in its portfolio. KKR is also competing with other asset management firms for investors, putting pressure on its fees.

2. Softbank

Softbank is a Japanese telecom and e-commerce company that also operates a holding company and its well-known $100 billion Vision Funds. Vision Funds invest primarily in private equity companies with valuations topping $1 billion, also known as unicorns.

Softbank bought its stake in ByteDance in 2018 in the same funding round as KKR's initial investment. Softbank owns a massive portfolio of both public and private equity.

Its most notable holdings include Alibaba (BABA 0.59%), T-Mobile (TMUS -0.06%), and chip-designer ARM (ARM 4.11%). The holdings are heavily concentrated in early-stage internet and e-commerce investments, so investors aren't getting a tremendously diversified portfolio. As the tech start-up industry goes, so does Softbank's portfolio.

Should I invest?

Should I invest in TikTok?

TikTok's parent company, ByteDance, is an exciting business for investors. It popularized the short-form video format, built an incredible content-recommendation algorithm, and is working on new ad technology to monetize it. But it's also a high-risk investment because it faces potential challenges from regulators and deep-pocketed competitors.

While TikTok's user growth may be slowing from the astronomical levels it saw in previous years, it's just starting to ramp up its advertising business. The company generated about $10 billion in global ad revenue in 2022. TikTok's Chinese counterpart, Douyin, generated about $19 billion. Overall revenue for ByteDance came in at $85.2 billion that year, generating $20 billion in operating profit.

Sales continued to grow in 2023. The company brought in $54 billion for the first half of the year. About 20% of that revenue came from outside China.

But TikTok also faces intense competition from big digital advertising and social media companies like Facebook parent Meta Platforms (META 0.43%) and Alphabet's (GOOG 9.96%) (GOOGL 10.22%) Google. Both have copied TikTok's short-form video format.

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However, both arguably have greater resources than the Chinese company to build audiences and content-recommendation algorithms while monetizing their respective platforms. Meta has been particularly aggressive with its Reels format on Facebook and Instagram, and it's just starting to focus on monetization, which could slow revenue growth for TikTok.

Additionally, ByteDance faces a lot of risk of regulation. It's already been shut down in India, where it had 200 million users. The Indian government cited issues of privacy and national sovereignty.

The app could be banned in the United States -- one of its largest, most lucrative markets -- as well as Canada and several European nations. Many governments have already banned the app on government devices, and some states have restricted access to TikTok on government-owned internet connections.

Those risks aren't unique to TikTok. Many Chinese tech companies face similar challenges regarding regulation, and any small start-up must overcome deep-pocketed competitors. As long as you understand those risks, investing in TikTok through a private equity asset management firm may be suitable for your portfolio.

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