What Oracle’s winning TikTok bid implies for EM Tech
- The deal could be a prelude to acquisitions by TikTok's parent, ByteDance
- It could also be a prelude to TikTok listing in Hong Kong or Shanghai
- We expect EM social media, data and e-commerce players increasingly to join forces, including mergers and acquisitions
ByteDance, the owner of TikTok, has chosen tech giant Oracle as its preferred buyer of the US wing of the video-sharing platform, according to reports. The deal is subject to confirmation, as well as regulatory approval.
President Trump had vowed to ban TikTok in the US because of national security concerns and urged ByteDance to sell the TikTok’s US operations. This spurred a bidding war between, among others, Microsoft and Walmart, with Oracle apparently winning out in the end.
The TikTok issue is at the heart of the tech dimension of the US-China tension, and is also an example of the emerging geographic fragmentation of the internet – known as Splinternet.
Our take on the deal's implications:
1) It could be a prelude to acquisitions by TikTok's parent. ByteDance's overall valuation has been estimated at US$100bn-140bn, according to private deals cited on Bloomberg. In FY 19, it generated US$3bn net profit and US$17bn revenue.
TikTok, which specialises in short mobile-friendly videos, is the fastest-growing social media platform in the US, and the US wing could be valued at as much as cUS$20bn (based on Facebook's valuation per user of US$198 and TikTok US's 100mn users).
The estimated US$20bn cash would provide ByteDance with the firepower to acquire other social media players in emerging markets. Indonesia, Brazil, Russia and China, for example, have burgeoning social media platforms that could be accretive to TikTok, such as Tan Tan and VK, to name but two.
2) It could also be a prelude to TikTok's listing in Hong Kong or Shanghai, providing EM investors with a social media platform rivalling the scope and scale of Facebook, Twitter and Snap.
3) We think a number of EM social media, data and e-commerce players could join forces. Facebook's investment in Reliance Jio is an example of moves of this nature. In this note, we reiterate our positive perspective on the Baby Amazons, some of which could well be acquisition targets for the global tech giants, as the march of EM e-commerce intensifies.
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This report is independent investment research as contemplated by COBS 12.2 of the FCA Handbook and is a research recommendation under COBS 12.4 of the FCA Handbook. Where it is not technically a res...