ByteDance Shelved New York IPO Plans Months Ago After Stern Warning From CCP

Last week, CNBC was among the first to report that ByteDance, owner of social-media darling TikTok, had decided to switch the venue of its planned IPO from New York to Hong Kong. The decision would likely result in a lower valuation, but ByteDance’s management had made peace with that fact, since the CCP had made clear that it didn’t want the tech giant – which handles reams of Chinese user data, which the CCP now considers a national security risk – listing abroad.

On Monday morning, WSJ followed that up with a report confirming that ByteDance had actually made up its mind long before the disastrous IPO of Didi Chuxing, the Chinese ride-hailing app which has seen its shares lose nearly half of their value from a post-IPO high.

The company’s founder, Zhang Yiming, decided after meeting with regulators back in March.

That’s bad news for ByteDance’s many backers in both the west and east. The list includes Sequoia Capital, KKR and – of course – SoftBank. Since ByteDance isn’t burning cash by the billions like Didi is, the company isn’t facing any immediate pressure to raise money in the public markets. ByteDance has told its employees that the firm booked $19 billion gross profits last year as advertising revenue soared to $34.3 billion.

The company said back in April in a statement published to its social media accounts: “After serious research, we think the company does not fulfill the necessary requirements to go public, and currently have no such plan.” The company didn’t provide further explanation for its decision at the time.”

We already know that ByteDance was among a group of 13 tech companies summoned by China’s internet regulators back in April and warned to adhere to tighter regulation of their data and lending practices. It’s already clear that ByteDance’s trove of consumer data has lured Beijing’s interest, and the odds that it will ever list in the US are growing smaller by the day.

The company still faces scrutiny in the US, and late last week Sen. Marco Rubio told the FT that Didi’s listing was “reckless and irresponsible” and spoke out against other Chinese listings.

China said last week that it would strengthen oversight of its offshore listings, and its securities regulator is reportedly drafting rules requiring any companies hoping to list offshore to seek the explicit permission of the CPC.