It’s not often that we get credible reports on the finances of private companies. The WSJ has reported on the recent financials of TikTok parent ByteDance. While the company is the most valuable startup company, it is posting billions of dollars in losses every year.
Citing a financial report that was shared with employees, the WSJ reported that ByteDance reported revenues of $61.7 billion in 2021, up 80% from the previous year. At the same time, its expenses also rose and the cost of sales increased 79% to $27.4 billion over the period.
The company spent $19.2 billion on sales and marketing in the year while the research & development expense was $14.6 billion. ByteDance’s operating loss swelled to $7.15 billion in 2021 as compared to $2.14 billion in 2020.
ByteDance also booked a $75.6 billion loss on mark-to-market losses on convertible securities. Due to these losses, the company posted a net loss of $84.9 billion in 2021 which was 84% higher than the previous year.
ByteDance Reported Narrow Losses in the First Quarter of 2022
Meanwhile, Bytedance reported revenues of $18.3 billion in the first quarter of 2022 which was 54% higher than the corresponding quarter last year. Its net losses also narrowed to $4.7 billion, 84% lower than what it posted in the first quarter of 2021. Importantly, the company posted an operating profit in the quarter.
While ByteDance is mainly known for TikTok, it has several other business verticals. The company also owns Douyin which is the TikTok-like short video app in China. Notably, TikTok is not allowed in China.
Earlier this year, ByteDance also announced the acquisition of a hospital chain in China, joining the ranks of tech companies like Apple, Alphabet, and Amazon that are expanding in the healthcare business.
ByteDance Has a Strong Cash Position
Thanks to the backing from marquee investors like Sequoia Capital, KKR, and General Atlantic, ByteDance has a strong cash position. At the end of the first quarter, it had cash and cash equivalents of $42.6 billion which was higher than the $34.1 billion that it had at the end of December.
A strong cash position would help the company spend on growth. In an email to employees, ByteDance said, “Though the market may fluctuate, we remain confident in the strength of our business and organization.”
ByteDance was valued at $180 billion in a 2020 funding round where along with the existing investors, Fidelity also participated. The valuation jumped to above $400 billion in secondary markets. However, its valuation has since come down.
Given the turmoil in public markets, valuations of private startup companies have also come down. Some of the biggest haircuts have come in Alibaba-backed Ant Financial and fintech startup Klarna.
When Will TikTok and ByteDance IPO?
Reportedly, TikTok and ByteDance have no immediate plans to go public. In 2020, TikTok was set to IPO in the US as part of a deal with then-President Donald Trump who threatened to ban the app in the US.
Many countries see TikTok as a security threat and India has banned the app. Many countries are concerned about data privacy given the Chinese ownership of ByteDance. Given the current volatile IPO market, ByteDance might not look at an IPO anytime soon. The US IPO market has especially been dead this year. There are however ways through which one can invest in pre-IPOs.
TikTok’s Popularity is a Challenge for US Tech Companies
The rising popularity of TikTok is a challenge for US tech companies like Meta Platforms and Alphabet. While Facebook is focusing on Reels, YouTube is betting on Shorts to compete against TikTok.
Facebook’s popularity has anyways come down among US teens who are instead pivoting to alternative platforms including TikTok. Meta Platforms is among the worst-performing S&P 500 stock this year. However, many analysts now see Meta Platforms stock as a buy given its low valuations.
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