TikTok is one of the fastest-growing social media platforms in the world, challenging Facebook, Instagram, and other social media giants. So it’s only natural that investors would want to get in on the action. But to do that, you would need to buy TikTok stock.
Unfortunately, investing in TikTok is not as easy as using the platform, though there may be ways to participate financially in the company’s growth without going through the usual channels.
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About TikTok
Based in China, TikTok is a short-form video hosting service that’s become one of the most popular social media platforms in the world. It’s done this in near-record time, having only been founded in 2016.
TikTok is available as a mobile app for both iOS and Android devices, where it’s been downloaded more than 2 billion times. That includes over 150 million downloads in the US alone.
It’s referred to as a short-form video hosting service because videos posted on the site cannot exceed 10 minutes (this is in contrast to YouTube, where videos can last for hours).
Why All the Buzz Over TikTok?
Based on monthly active users, TikTok is the sixth-largest social media platform in the world. It has over 1 billion monthly active users. This compares to nearly 3 billion for Facebook, 2.5 billion for YouTube, and 2 billion each for WhatsApp and Instagram.
But the number of users understates its popularity. Its Chinese counterpart, Douyin, has over 700 million monthly active users, bringing the number of users on the two platforms combined to more than 1.75 billion.
Altogether, TikTok is available in more than 150 global markets and in 75 languages. The platform has a strong appeal to younger users, with 41% between the ages of 16 and 24. It has also become highly popular among entertainers and other celebrities.
In a real way, America – and the world – has caught TikTok fever. And as we’ve seen with the rise of other popular social media, that has powerful investment implications.
Can You Buy TikTok Stock?
Unfortunately, since TikTok is a privately held company, there is no stock to buy. At the moment, TikTok is wholly owned by a Chinese company called ByteDance, which also owns TikTok’s sister platform in China, Douyin.
But does that mean there are no investment opportunities connected with TikTok? Not necessarily.
How to Invest in TikTok Indirectly
While you can’t purchase TikTok stock, you may be able to invest in its parent company, ByteDance. But even that is a complicated undertaking.
ByteDance is a privately held company, which means it doesn’t issue publicly traded stock, either. That makes investing in ByteDance nearly as problematic as doing so with TikTok.
But you may be able to participate in ByteDance – and indirectly in TikTok as well – by buying a position in the company through its owners.
As a privately held company, ByteDance is owned by various entities. Some of them are private equity firms, like KKR & Company. And since KKR & Company is a publicly-traded company (symbol: KKR), you can invest in KKR stock. But it’s a very indirect way to own a small piece of ByteDance, along with other properties held by KKR.
But be aware that investing in private equity generally requires you to be an accredited investor. That means you must meet minimum income or net worth requirements or have certain occupational qualifications related to investing.
Will TikTok Go Public?
The greatest opportunity to invest will be if and when ByteDance finally decides to go public. When it does, as with most companies looking to go public, it will be available as a pre-IPO (initial public offering) to select investors.
An even better scenario? If ByteDance were to spin off TikTok as an independent company, offering its own stock.
Whether that happens remains to be seen. At the moment, it’s a long shot. If it did, you could try to get in on the pre-IPO, which would give you an opportunity to buy the stock before it’s made available to the general public on the stock exchange.
In case you’re wondering, investing platforms like Lingto or EquityZen specialize in pre-IPO offerings. But you must need to be an accredited investor to participate, and the financial requirements will exclude the majority of investors.
A more convenient way for most investors to take advantage of a pre-IPO in ByteDance, TikTok, or any other company, is through investment apps like Robinhood or Webull. Not only do they not require accredited investor status to participate in IPOs, but they also don’t charge trading fees.
Should You Invest in KKR?
Apart from the accredited investor requirement, an important consideration is that buying KKR stock does not represent a direct investment in ByteDance. However, if you were to invest in KKR stock and ByteDance were to announce an IPO, you would almost certainly profit from your ownership of KKR stock.
Will the US Government Ban TikTok?
Something to keep in mind is that the US government is considering banning TikTok (in the US). There is widespread suspicion that TikTok is an agent of the Chinese government, required by Chinese law to report user activity to Chinese government authorities. And the US is not the only country to consider a ban on the social media platform.
If a ban were to take place, a large slice of TikTok’s market would be removed from its business. In addition, a move by the US to ban the social media giant could have implications for additional bans in other countries.
Though the government is currently moving to consider such a ban, the likelihood is unknown.
TikTok claims it’s being used by over 150 million people in the US. That means it’s already culturally integrated with the American population. It’s being used in much the same way as Facebook, Instagram, YouTube, and other social media platforms, for individuals to create videos and share ideas and messages with millions of others. As such, there may be resistance to such a ban at a grassroots level.
With that in mind, you shouldn’t consider any investment in TikTok until the possibility of a ban has been rejected. After all, TikTok – or ByteDance – would lose a lot of its value if it could no longer compete in one of its largest and richest markets.
The Bottom Line
At least at this point in time, the combination of a potential ban, along with the absence of any publicly traded stock, makes investing directly in TikTok impossible.
Yes, TikTok could prove to be one of those once-in-a-lifetime investments were it to clear those hurdles. But even that prospect has complications.
As a conglomerate, ByteDance is involved in several different business ventures. If one or more go sour, ByteDance may not prove to be as profitable as other social media platforms, namely Facebook.
The bottom line is that there’s nothing wrong with keeping TikTok and ByteDance on your radar in case things change in the future.
TikTok could end up being the investment play of the decade. Or it could be the greatest investment play that never was.
Only time will tell.