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Will the ByteDance (TikTok) IPO happen in 2020 after halting Hong Kong access?

TikTok has halted operations in Hong Kong and its parent company ByteDance said it is ‘evaluating changes to the corporate structure’ of its popular social media platform. But will its hotly anticipated IPO still go ahead in 2020?

ByteDance (TikTok) announced that it has halted operations in Hong Kong after China imposed a new security law on the city, according to a post on the social media platform’s website.

The new law will restrict freedoms in the semi-autonomous territory, raising concerns internationally Beijing may coerce the social media platform to share users data with Chinese authorities.

‘TikTok is led by an American CEO (former Disney executive Kevin Mayer based in Los Angeles), with hundreds of employees and key leaders across safety, security, product, and public policy here in the US. We have no higher priority than promoting a safe and secure app experience for our users,’ a spokesman for TikTok said.

Running alongside this news, TikTok’s parent company ByteDance said it is ‘evaluating changes to the corporate structure’ of its popular social media platform. ByteDance also insisted that it would refuse to share TikTok user date with Chinese authorities.

‘We have never provided user data to the Chinese government, nor would we do so if asked,’ the company added.

TikTok has faced considerable political pressure in recent years, with the social media platform the target of scrutiny from India, China and the US.

In India, TikTok has its app banned for a total of two weeks in April last year, after the courts ruled that it was spreading pornographic content and inciting racial hatred, as well as potentially exposing children to sexual predators and encouraging cyberbullying.

Will the ByteDance (TikTok) IPO still go ahead in 2020?

With so much to contend with amid the fallout from the coronavirus, financial markets in turmoil and ByteDance looking at making changes to its corporate structure, it is unclear if TikTok’s highly anticipated IPO will happen in 2020.

When rumours first began flying around about a possible IPO many expected the listing to take place in the first quarter (Q1) of 2020. Unsurprisingly, ByteDance has poured water on the IPO rumours, but the company certainly wants to go public eventually, with the real question being a matter of when, rather than if.

ByteDance is currently valued at over $78 billion (£61 billion), with early-stage investors eager to cash out via an IPO. But some analysts, including those from China-based Guodu Securities said it doubts that ByteDance will achieve that valuation in a public offering.

It is important to note that ByteDance only managed to turn a profit in June 2019, with it unclear if the company’s business model is capable of consistently delivering strong financial results.

As such, investors would likely struggle to support its IPO, especially when the market has been burned before by the likes of Uber and Lyft, with the pair seeing their share prices weighed down by a lack of consistent income.

So will the ByteDance (TikTok) IPO happen? Yes. But it looks unlikely to occur in the near-term, considering that the US stock market recovery has stalled amid a second wave of coronavirus cases. After all, for the ByteDance IPO to be a success it requires the support of US investors and that is a big ask right now.

S&P 500 futures modestly lower

The price of the S&P 500 has drifted back from the highs of the week, but if it can repeat yesterday’s trick (and last Friday’s) of bouncing from 3120 then another test of 3180 may develop, according to Chris Beauchamp, chief market analyst at IG.

‘Alternatively further declines target 3080 and then 3020 in the short term,’ he added.

How to trade ByteDance (TikTok) ahead of its IPO

Trade IG's ‘grey market’ ahead of the ByteDance (TikTok) listing, allowing you to speculate on the company’s share price before it lists. Our grey market price is based on our prediction of ByteDance’s market cap at the end of the first trading day.

With our grey market, you can:

  • ‘Buy’ if you think the market cap will be higher than the price indicated
  • ‘Sell’ if you think the market cap will be lower than the price indicated

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