ByteDance’s TikTok woes are never-ending sideshow

Ticktock. TikTok's Chinese parent is stuck in a Washington doom loop. Four years after then U.S. president Donald Trump tried to ban the popular short-video app, lawmakers on Wednesday passed a bill giving ByteDance six months to divest its American assets or face a ban. It escalates a seemingly endless fight for the privately-held company led by co-founder and CEO Liang Rubo.

Washington's latest assault on TikTok, which critics label a national security threat, has a sense of deja-vu. In 2020, Trump tried to force an auction of TikTok's U.S. operations in which Walmart and Oracle were rumoured buyers. Since then, more than two dozen states have banned the app from government phones; Montana went as far as blocking TikTok, only to have the decision overturned. Any definitive action from Washington will take time as the bill grinds it way through the Senate, where many prominent lawmakers have yet to endorse it.

The distraction is costly and will make it harder for ByteDance to focus at home, where it operates TikTok's sister app, Douyin. The company faces a slowing economy, fierce competition from Alibaba and Tencent-backed Kuaishou, and Beijing's tightening regulations on everything from video-streaming to video games to artificial intelligence. Against this backdrop in its largest and most important market, the company is trying to offload non-core assets and retrenching to focus on Douyin, e-commerce and local services like food delivery.

The rejig is substantial. Earlier this year, ByteDance confirmed it was in talks with prospective buyers to sell its gaming assets, after Reuters reported it was looking to offload a studio it acquired in 2021 for $4 billion. ByteDance may also be rethinking its virtual reality business, Pico. Last month, the head of Douyin also resigned. Nonetheless, ByteDance is managing its growing list of problems surprisingly well.

Thanks to advertising and e-commerce, revenue surged 30% to $110 billion last year, according to Bloomberg. Earnings before interest and tax in the three months to June alone hit $9 billion, per the Financial Times, helping the company boost its cash pile to $51 billion. In the United States, TikTok claims 170 million users, 70% more than in 2020.

That success offers some relief. But the TikTok saga means the company is unlikely to push ahead with an initial public offering. To that end, ByteDance has been steadily buying back shares; most recently from investors at a $260 billion valuation, down from $300 billion last summer. The purchases ease some of the pressure from employees and backers that include Japan's SoftBank Group and U.S. firms KKR and General Atlantic. ByteDance has had to be creative but its fortunes have not fallen too far.