The estimated $14 billion valuation for TikTok’s US business, proposed by the Trump administration, has surprised potential investors, who believe it significantly undervalues the platform. This figure, cited by Vice President JD Vance, is considerably lower than previous estimates, which approached $40 billion. The plan involves American investors acquiring the US operation from the Chinese internet firm ByteDance Ltd., with the final price ultimately determined by the purchasers.
Market analysts like Ashwin Binwani, founder of Alpha Binwani Capital, consider the proposed valuation a potential bargain, perhaps the most undervalued tech acquisition of the decade. He believes the figure reflects only a fraction of TikTok’s true worth. The platform is one of the most popular social media properties in the US, with its influence evident in the rise of competing short-video services, such as Instagram Reels and YouTube Shorts.
Valuing TikTok has always been challenging, particularly given the complexity of its content algorithm. However, the US operation, generating over $10 billion in annual revenue and boasting 170 million active users, is the firm’s most lucrative market. At the proposed valuation, TikTok US would have a price-to-sales ratio of approximately 1.4 times, comparable to more mature, low-growth companies. This contrasts sharply with the valuations of Instagram, operated by Meta Platforms Inc., and YouTube, under Alphabet Inc., which trade at much higher multiples.
The deal, which must be finalized within 120 days, would involve spinning out TikTok US into a new joint venture, reducing ByteDance’s stake to less than 20% to address US national security concerns. While approval from Chinese President Xi Jinping has been suggested, Beijing has yet to officially confirm its consent. The situation is described by Alvin Foo, a venture partner at Zero2Launch, as a forced sale, raising questions about the operational aspects of the service, given that the proposed buyers lack experience in internet or consumer-facing businesses. More stories like this are available on bloomberg.com.