TikTok is a very popular app today and whether you like it or not, you cannot deny its popularity. It is attracting new users and is highly preferred than other social media apps including Facebook (NASDAQ: META) and Instagram today. When it comes to investing, a lot of traders think that TikTok has huge potential and investors are looking for TikTok stock since it is only growing in popularity and active user base year after year. If you also want to enjoy an early mover advantage and are looking to invest in TikTok stock, keep reading this article.
In this guide, you will find out if you can invest in the stock and how you can invest do it.
What is TikTok?
For those who are unaware of what TikTok is and how it works, it is a video-sharing service and the app is very popular with millennials and Generation Z. The app is used to create short-form videos that range in duration from 15 seconds to about three minutes. These videos could be anything from jokes, stunts, dance moves, entertainment, or even pranks. TikTok was released in 2016, it merged with musical.ly and entered the U.S. market in 2018 and reached a billion monthly active users in 2021. This is also when it became the most popular iPhone app downloaded in the U.S.
Most importantly, the platform is ideal for marketing since it has the potential to reach several accounts with little effort.
Who is the owner of TikTok?
TikTok is owned by a company named ByteDance and it is based in Beijing. Earlier in 2016, ByteDance released an app called Doyen and it operates in China. Once they launched the app across the world in 2017, they named it TikTok. Interestingly, the app has more engagement than Instagram and YouTube which also means it has a high ad revenue.
Just the way Meta Platforms own Instagram and Facebook, or Alphabet (NASDAQ:GOOGL) owns Google and YouTube, ByteDance owns TikTok.
Is the company publicly listed?
Now, if you are keen on investing in TikTok stock, you will have to figure out if the company is publicly listed. ByteDance owns TikTok and it is not a public company yet. This is why it is not publicly traded and we do not have a stock price. But, there is no clarity on whether the company will go public or not. Even if the company intends to go public, there are a lot of compliance measures and standards to follow.
Does TikTok stock trade on the market?
Since the company is not publicly listed, TikTok stock is not available on the stock market and you cannot get its official price. Many do expect the company to go public soon. For now, it does not have a ticker symbol or a listing. Once it becomes available, it could be listed for more than $100 per share based on the prices of other social media stocks in the industry today.
How can you get TikTok shares?
Now that it is clear that you cannot buy TikTok shares directly from the stock market, you need to look for different ways to invest in the company. There are two ways you can consider- buying shares in private equity companies or becoming an accredited investor. Let us take a look at both ways in detail.
TikTok shares are owned by private equity firms and these include KKR, SoftBank, Hillhouse, Coatue, Sequoia Capital, Source Code Capital, and General Atlantic. So if you want to own TikTok shares, you can invest in one of these companies.
KKR: Kohlberg Kravis Roberts & Co. or KKR is an investment company located in New York. The company achieves strong investment returns through a methodical approach and has invested in TikTok. So, by buying shares in KKR, you can invest in TikTok.
Softbank: An active investor in technology companies, Softbank has invested in several tech firms including Uber (NYSE:UBER), Slack, ARM, and NVIDIA (NASDAQ:NVDA). Since the company is listed on the top exchanges, buying the stock is simple.
The others are privately held companies which means you cannot invest in them.
Another alternative is to become an accredited investor.
There are companies like Equitybee which allow investors to invest in VC-backed startups and through the company, you can become an investor in ByteDance. You have to fund the employee stock options and own a stake in the company and in exchange for your investment, you get proceeds from the liquidity events.
However, there are many other stocks you can buy today.
Why should you invest in TikTok stock?
There are several reasons why people are keen on investing in TikTok stock. Let’s take a look at them.
It is engaging
This is the time when people have very short attention spans and they are looking for short-form content, whether it is audio or video. TikTok is designed to keep users hooked and scrolling for long hours. It understands what the users like to see and offers just that, using its powerful algorithm. Due to this, TikTok has grown at a massive rate and it boasts one billion active monthly users. Only a couple of social media apps have a million users including Facebook and YouTube. This means TikTok has a solid chance of overtaking them.
Its parent company has an impressive valuation
TikTok is owned by ByteDance which is a private company. So it does not have a specific market value but it was worth $400 billion in October 2021. The company has already had 12 successful rounds of funding which helped it with a cash inflow of $9.4 billion. Besides SoftBank, it also received funding from Goldman Sachs and Morgan Stanley. Such massive companies would not provide funds unless they see strong growth potential.
Strong future potential
TikTok currently has more than one billion active monthly users but this is not it. There is ample room to grow and if you look at the other social media apps, TikTok holds a strong appeal to the younger generation and it means the users will only grow over the coming years.
It can improve
TikTok has faced a lot of criticism in the past due to the way it handles user data and to deal with this, it announced a strategy to locally store the users’ data in Europe. It also has a page where users are advised to stay away from harmful challenges or posting distressing content. Such strategies can make a huge difference to the users and how they use the social media app.
TikTok has shown impressive user growth and it is the main reason why it could be a good investment once the company goes public. It is the fastest-growing social media platform and it could continue to grow and become one of the top apps globally. It has already expanded to 150 markets across the world. Due to the growing user base, companies have shown interest in TikTok and they are keen to run their advertisements in order to generate interest in their products. With a growing user base and high ad revenue, TikTok could go a long way.
How to invest in TikTok IPO
You cannot buy TikTok shares from the stock market and the exact IPO date is not available but if there is an opportunity to invest in the stock, you need to know how you can trade the IPO.
- Open a brokerage account with a reliable and trusted broker.
- Search for TikTok IPO.
- Decide on the amount you want to invest
- Place a purchase order.
If it lists above the IPO price on the listing date, you are already sitting on a profit.
The Bottom line
TikTok has gained massive popularity in little time and it is not possible to write it off or consider it a fad. Investors are always on the lookout for stocks that have strong growth potential and considering the mass appeal of TikTok, it will attract many investors when it chooses to go public. It is a way of capitalizing on its success at an early stage. ByteDance is valued at $400 billion or more today and even if it goes public, the price of TikTok stock cannot be predicted today. Since the company is not public, the market value cannot be considered confirmed. Remember to read the prospectus well and do your research before you jump in on the opportunity of investing in TikTok stock.