How to Buy TikTok Stock in 2024

The rising interest in TikTok has many investors curious about how to buy TikTok stock. TikTok is not a publicly traded company – it’s a subsidiary of ByteDance – and its parent company’s shares do not trade on a US exchange, making it a complicated investment.

Let’s look at TikTok’s stock and how you can invest in it.

Update: in Sept 2022, ByteDance CFO Julie Gao reiterated that the company has no plans to go public, making an IPO highly unlikely.

Update: in April 2023 the Financial Times cited an unnamed US tech investor as stating that a ByteDance IPO is not likely to happen soon: “TikTok has to be sorted out first… and everyone wants to see the Ant Financial problem resolved before any ByteDance IPO.”

What Is TikTok?

TikTok is a video-sharing social networking service. Its users use it to create short videos, between 15 seconds and 10 minutes.

This mobile app belongs to a company called ByteDance. ByteDance is a privately held Beijing-based company founded in 2012. ByteDance is currently valued at around $220 billion, a 25% drop over the last year.

TikTok is the international version of Douyin, which was launched in 2016 in the Chinese market. In 2017 it was branded TikTok and launched internationally outside China. Even though the apps are similar, they run on separate servers to comply with Chinese censorship restrictions.

An interesting feature of TikTok is that it uses artificial intelligence to analyze users’ interests and preferences and display personalized content to them.

Why Does TikTok Get So Much Attention?

Source: Business of Apps

In 2021, TikTok was the most downloaded app of the year beating Facebook, Instagram, WhatsApp, and Messenger. TikTok is currently the 6th most popular social media app in the world and the second most popular video-specific app, behind only YouTube.

TikTok has also seen its share of controversies. The app was briefly banned in Pakistan and India. The Trump administration proposed a US ban for security reasons, though some observers believed that it was a consequence of pranks by TikTok users aimed at Trump, notably a mass purchasing of rally tickets by non-attendees in 2020.

The combination of popularity and controversy draws attention, and TikTok has become a highly recognizable brand for consumers and investors alike.

Is There a Stock Associated With TikTok?

TikTok is a product created by a Chinese company called ByteDance. ByteDance is still privately held, meaning its shares are not available on the stock market yet.

That said, ByteDance has received investment from SoftBank, a well-known investment firm. Softbank is keen to have a successful IPO amongst its investments, after Uber, Slack, and WeWork’s failures, and ByteDance will likely be their next bet. That means it’s reasonable to believe that ByteDance will go public at some point soon and therefore enable users to invest in TikTok.

How Can I Invest in TikTok?

Some platforms provide a secondary market for pre-IPO equity. The way it works is that shareholders of private companies can sell their stock options to investors. Most shareholders will probably be employees of these companies that want to get some liquidity for their illiquid company stock.

These marketplaces often impose investor qualifications, and there is no guarantee or assurance that they will have available shares in any given pre-IPO company.

• Forge Global merged with Sharespost in 2020. The combined company is now the world’s largest marketplace for private company shares. Investors must make a minimum purchase of $100,000 worth of shares. The minimum may be higher for some companies. Investors may need to meet qualification requirements.
• EquityZen acquires shares from early investors or from employees who have received stock as part of their compensation. They work with companies to assure that transactions will be recognized and sell the shares to investors who meet the revised SEC “accredited investor” criteria. There’s a minimum investment of $10,000, which may be higher for some companies.
• Nasdaq Private Market provides access to private-company shares for investors who meet the SEC’s accredited investor criteria.
• EquityBee is a private marketplace that allows investors to fund employee stock options in return for a share in the proceeds of an eventual sale.

Another possibility is investing in a private equity fund that invests in companies like ByteDance in venture capital rounds. Both EquityZen and AngelList provide such funds where investors can diversify their investments in early-stage or pre-IPO stage companies. By investing in these funds, investors get exposure to great early-stage companies pre-screened by professional investors.

These private equity funds usually require an investor to be a high-net-worth individual. That means only wealthy individuals can really invest in such funds.

 📚 See ALL the ways you can get in on pre-IPO investing: How to Buy Pre-IPO Stocks?

Invest in the IPO

If pre-IPO shares are not available or if the minimum purchase or qualification requirements are prohibitive, you can consider investing in the IPO itself.

Most IPO underwriters allocate set numbers of shares to specific brokers for their clients. You’ll need an account with a broker that has a share allocation. You will tell your broker how many shares you want and they will tell you how many you can get. There is no assurance that you will be able to get a share allocation.

Many brokers have requirements for IPO participation, which you will have to meet.

• Charles Schwab requires a history of at least 36 trades and an account balance of $100,000 or above for IPO participation.
• E*Trade has no minimum account balance or trading history requirements for IPO participation. An eligibility questionnaire may be required by the underwriters of the IPO.
• Fidelity allows IPO participation for clients who meet a minimum household asset requirement or are in their Private and Premium client groups.
• TD Ameritrade offers participation in IPOs if they are part of the selling group. You will need a minimum account balance of $250,000 or 30 trades in the last calendar year to qualify for an IPO share allocation.

IPO shares may come with a lockup period, often 60 or 90 days. You will not be able to sell your shares until the lockup period expires.

IPO shares will cost more than pre-IPO shares. That cuts your potential gains, but you’ll also have less risk. If you buy at an IPO you know there will be a market for your shares when the lockup period expires, even if there’s no assurance of profit.

There is no assurance that a ByteDance IPO would happen on a US market. If you want to buy at a foreign IPO you will need to look into investing in foreign markets.

Invest After the IPO

The easiest and safest way to buy stock in ByteDance is to wait until after the IPO. You can use your usual broker and there won’t be any special requirements or lockup period. You’ll be able to sell whenever you want.

If you buy after the IPO you won’t get in as cheaply as you would with an IPO or pre-IPO purchase. On the other hand, you’ll be able to buy as few or as many shares as you want, and you’ll have a chance to observe the stock’s market reception before you pull the trigger. That’s especially important if the company makes its debut during a generally weak market.

Getting in before the IPO is not a guarantee of quick profit. Not all stocks spike in value after an IPO. Some, even shares in quality companies, may sputter or even drop immediately after the IPO.

If you buy after the IPO you won’t get the rock-bottom prices that you would get from a pre-IPO purchase or the somewhat higher price you’d pay for participating in the IPO. On the other hand, you will be able to gauge the market’s reception to the IPO before you buy. Not all IPOs soar out of the blocks. Some of them crash.

For long-term investors, the price difference between a pre-IPO and a post-IPO purchase may not be large enough to justify the greater complexity and risk of buying early. If you’re in that bracket, a post-IPO purchase is probably the best way to go.

Since it’s unlikely that there will be another funding round in the short-term, waiting for ByteDance to become public seems to be the simplest route to invest in TikTok.

Also, it’s worth keeping in mind that choosing stock on your own is not always a great idea, especially pre-IPO.

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Are There Any Issues With TikTok?

All investments involve risk, and pre-IPO investing is particularly risky. If you are considering an investment in TikTok, consider these and other risk factors.

• There may not be an IPO or an exit point. There is no way of knowing when or if ByteDance will have an IPO. If the company does not go public it could be difficult or impossible to sell shares.
• TikTok is controversial. TikTok has been temporarily banned in several major markets. Further bans could hava an impact on the company’s results.
• China/US friction. TikTok and ByteDance could be caught up in trade or political disputes between the US and China that could affect the company.
• Social media is a fast-changing, trend-driven business. Right now TikTok is the rising star but next year there could be a new one.
• Internal Chinese issues. Several Chinese tech companies have seen crackdowns from Chinese authorities. ByteDance could be next.

As with any investment, careful balancing or risks and potential rewards is essential.

Conclusion

ByteDance is the world’s most valuable VC-backed company by a wide margin. That alone is guaranteed to whet the appetities of investors. There’s still no indication that the company will go public any time soon, or at all. Under these circumstances investment would have to be considered highly speculative if it is possible at all.

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