ByteDance pays to kick IPO can down the road

Man stands near a giant sign of Chinese company ByteDance's app TikTok, known locally as Douyin, during China Fashion Week, in Beijing
A man stands near a giant sign of Chinese company ByteDance's app TikTok, known locally as Douyin, during China Fashion Week, in Beijing, China March 31, 2021. REUTERS/Tingshu Wang - RC24MM9UKX2T

HONG KONG, Sept 19 (Reuters Breakingviews) - ByteDance is dancing to a different tune to keep stakeholders happy. TikTok's Chinese parent is spending up to $3 billion read more to buy back shares at a price that values the company at around $300 billion. It's extending an employee stock incentive programme for another 10 years and expanding the share pool. Given its initial public offering looks stalled, both moves will help keep investors and employees onside.

Startups rarely have good reasons to splurge on buybacks. But in this case backers including SoftBank (9984.T) and Sequoia Capital can hope ByteDance's repurchase plan puts a floor under its falling private-market valuation. Taking some money off the table now looks prudent, too. In addition to the current global stock rout and regulatory volatility in Beijing, the company also faces growing scrutiny in Washington over data security at its short-video crown jewel, TikTok, which boasts 1 billion monthly users worldwide.

The company also needs to boost internal morale. ByteDance has laid off staff as part of a broader restructuring effort that has seen it back off from once-enticing segments like video games and online education. With growth set to slow further this year, ByteDance is paying up to keep the music playing. (By Robyn Mak)

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(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)

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Editing by Pete Sweeney and Katrina Hamlin

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