TikTok has become a global sensation, with millions of users logging on daily to watch and create short-form videos. The app's parent company, ByteDance, is one of the world's most valuable privately held tech companies, with an estimated worth of over $180 bn. As a result, many investors are looking to get in on the action and buy shares in TikTok.
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- Shares in TikTok are not currently tradable on the open market.
- Alternative entry points to a TikTok investment
- Investing in social media ETFs
- TikTok is facing increased scrutiny from regulators over security concerns
Amongst the social media giants, TikTok is growing at the fastest rate. TikTok's emphasis on short-form video has struck a chord with the younger generation, who are driving its massive growth.
If you're an investor looking to ride the boom in the shift in social media tastes, TikTok's business model is worth investigating further.
Investing in TikTok is not straightforward, as the shares cannot be bought directly. However, it is possible buy shares indirectly, through the parent company’s major investors: ByteDance's major investors, KKR and Softbank.
Below we will take a look at the companies that could offer investment opportunities indirectly.
Table of contents
KKR & Co L.P. NYSE:KKR (KKR)
KKR, or Kohlberg Kravis Roberts, is a leading global investment firm specialising in private equity, credit, and real estate investments. In 2017, KKR invested $1bn in ByteDance, becoming one of the company's major investors. As a result, investors looking to buy shares in TikTok can consider investing in KKR.
To invest in KKR, investors can buy shares on the New York Stock Exchange (NYSE) under the ticker symbol KKR. KKR has a market capitalisation of around $30bn, making it one of the world's largest publicly traded investment firms. Investors can also consider investing in KKR through mutual funds or exchange-traded funds (ETFs) that hold KKR shares.
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Softbank Group Corp. JPX:9984 (9984.T)
Another option for investors looking to buy shares in TikTok is Softbank, a Japanese multinational conglomerate that invests in tech start-ups and other companies. Softbank invested $1.7bn in ByteDance in 2018, becoming another major investor in the company. As a result, investors can invest in Softbank to gain exposure to TikTok.
To invest in Softbank, shares can be purchased on the Tokyo Stock Exchange under the ticker symbol 9984. Softbank has a market capitalisation of around $100 bn, making it one of Japan's largest publicly traded companies. Investors can also consider investing in Softbank through mutual funds or ETFs that hold Softbank shares.
It's important to note that investing in KKR or Softbank does not guarantee direct exposure to TikTok. Both firms have investments in a wide range of companies and industries, and TikTok is just one of many investments in their portfolios. As a result, investors should carefully consider their investment goals and risk tolerance before investing in either company.
In addition, investors should be aware that investing in KKR or Softbank may not be suitable for everyone. Both companies are considered high-risk investments, and their stock prices can be volatile. As a result, investors should conduct thorough research and seek professional advice before making any such investment decisions.
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Alternative related social media investment opportunities
As investors cannot invest directly in TikTok, it might be worth considering investing in other social media companies likely to benefit from the groundswell of market interest in next-generation social media technology. Social media is a vast and complex forum to enter the market on, meaning that there is also a vast amount of trading opportunities.
Meta Platforms Inc (doing business as Facebook): NASDAQ:META (META)
Facebook can be a worthwhile alternative to invest in if you cannot get direct exposure to TikTok. While TikTok has experienced tremendous growth in recent years, Facebook remains a dominant player in the social media space, with a massive user base of over $2.8bn monthly active users.
The company also has a diverse range of products and services, including Facebook, Instagram, WhatsApp, and Oculus, which offer different ways to engage with users and generate revenue.
Furthermore, Facebook has been investing in new technologies and initiatives, such as virtual and augmented reality, which could potentially drive future growth.
The company has also shown a commitment to improving its advertising platform, which is a significant source of revenue. With its strong financials and market position, Facebook could be a long-term investment option for those looking to invest in the social media sector.
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Snap Inc. NASDAQ:SNAP (SNAP)
Snap Inc., the parent company of Snapchat, has been an exciting technology stock to watch in recent years. As of early 2023, Snap boasts a market cap of around $130 bn, making it one of the most valuable social media companies on the planet.
Snap has been on a growth trajectory in recent years, with its user base growing steadily each year. As of the end of 2022, Snap reported that it had over 350 million daily active users, up from 210 million in 2019. This growth has been fuelled by the popularity of Snapchat's unique features, such as its disappearing messages and augmented reality filters.
Secondly, Snap has been diversifying its revenue streams beyond advertising, which has historically been the company's primary source of income. The company has invested heavily in its e-commerce capabilities in recent years, allowing users to purchase products directly within the Snapchat app. This move into e-commerce could significantly boost Snap's revenue in the coming years as it looks to monetise its large user base more effectively.
Of course, like any investment, there are risks associated with investing in Snap. The company operates in a highly competitive space and faces significant competition from other social media platforms like Instagram and TikTok. Snap's stock price can also be volatile, with sharp swings up and down in response to news events and market conditions.
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Alternative Investments
For those looking to invest in social media companies, exchange-traded funds (ETFs) are available that provide exposure to the industry. One such fund is the Global X Social Media ETF, which trades under the ticker symbol SOCL.
The SOCL ETF tracks the Solactive Social Media Total Return Index, which includes companies worldwide that generate at least half of their revenue from social media-related activities. The list includes companies such as Facebook, Snap, Baidu, and Tencent.
Investing in the SOCL ETF provides diversification across various social media companies rather than just exposure to one specific company like TikTok. It also provides the convenience of being able to invest in the industry through a single investment vehicle.
The iShares U.S. Technology ETF (IYW) is a popular choice for investors seeking exposure to the technology sector. The ETF tracks the performance of the Dow Jones U.S. Technology Index, composed of large and mid-cap U.S. technology stocks.
While the ETF does not specifically target companies with exposure to TikTok, it does invest in a wide range of technology companies that may have indirect exposure to the platform.
That includes companies in the social media, e-commerce, and advertising sectors, among others. As with any investment, it's essential to do your research and assess the risks before investing in IYW.
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Final thoughts
Finally, it's worth noting that TikTok is facing increased scrutiny from regulators around the world, particularly in the United States and India. In the United States, the Trump administration sought to ban the app over concerns about data privacy and national security, although a federal judge ultimately blocked the ban. In India, the app was banned in 2020 amid rising tensions between India and China.
While TikTok has been able to navigate these challenges so far, there is no guarantee that the app will continue to grow and thrive in the face of increasing scrutiny. As a result, investors should carefully consider the risks and potential rewards of investing in TikTok and its parent company ByteDance.
In conclusion, investors looking to buy shares in TikTok can consider investing indirectly through parent company ByteDance's major investors, KKR and Softbank. Both firms offer exposure to the rapidly growing tech company, although investors should carefully consider their investment goals and risk tolerance before investing in either company. As with any investment, conducting thorough research and seeking professional advice before making investment decisions is vital.
