UAE spy chief’s firm invests in ByteDance at $220 billion valuation

• ByStartupStory     |    March 15, 2023

Abu Dhabi AI firm G42 recently made a private-market investment in ByteDance, valuing the Chinese tech giant at approximately $220 billion. However, this valuation is significantly lower than the $300 billion valuation set by TikTok’s owner in a recent share buyback program.

According to insiders, G42 – which is under the control of Sheikh Tahnoon bin Zayed Al Nahyan, a UAE royal – has purchased a stake in ByteDance worth over $100 million. This investment was made through G42’s 42XFund and involved buying shares from existing investors. Another unidentified fund also invested in ByteDance at a valuation of $225 billion around the same time. However, the sources declined to be named due to the confidential nature of the information.

The fluctuating valuation of the Chinese internet company ByteDance is a reflection of the uncertainty that has arisen since the US government indicated that it may ban the popular video-sharing app TikTok, which has been accused by lawmakers of posing a national security risk. In response to these concerns, TikTok’s management has reportedly considered the option of severing ties with its Chinese parent company, although this is seen as a last resort.

The valuation of ByteDance following the G42 investment does not fully take into account the potential impact of the recent implosion of Silicon Valley Bank, which has sent shockwaves through startup communities across the US and China and raised concerns about systemic risks. Despite this, ByteDance’s current valuation is still significantly lower than its peak of approximately $460 billion in 2021, which was reached when Tiger Global Management purchased shares in the company.

Sheikh Tahnoon, who is referred to as the UAE’s “spymaster,” has used his company G42 to invest in a diverse range of industries, including cloud computing, vaccines, and autonomous vehicles. In 2020, G42 established the 42XFund, a $10 billion fund that, along with other financial supporters, invests in technology firms in developing markets. The company has recently hired Jason Hu, the former head of investments at Chinese e-commerce firm JD.com, to help expand its presence in Asia.

The success of ChatGPT, a language model powered by AI, has generated growing interest in the technology, which could benefit ByteDance as the company has pioneered the use of algorithms to engage users with videos and news. 

In the long term, some investors believe that China’s tech sector could rebound despite concerns about the government’s intentions towards the private sector, as Xi Jinping’s administration has reassured investors about its pro-business stance.

ByteDance, the Chinese company that acquired TikTok’s predecessor, is among a small group of Chinese app developers that have achieved significant success overseas, along with companies like Shein Group, AliExpress, and PDD Holdings Inc.’s Temu app. 

ByteDance’s flagship service, TikTok, has attracted advertisers seeking to reach younger consumers, and the company has also found a niche selling products to social media users through livestreams around the world.

ByteDance has explored the possibility of an IPO in Hong Kong and the US, but market volatility has pushed the timeline for such a move further out. The company offered to buy back $3 billion of its own shares at a valuation of around $300 billion in September 2022, allowing existing investors to cash in some of their gains. 

ByteDance, which is backed by SoftBank Group and Temasek Holdings, generated approximately $12 billion in revenue from TikTok alone in 2022.

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