NEW YORK, July 11 (Portal) – ByteDance, the Chinese owner of short-video app TikTok, will allow the transfer of shares owned by US employees without waiting for the company to go public, giving them the opportunity The press says they are familiar with the matter.
The move aims to placate troubled employees who have been waiting for an initial public offering (IPO) to benefit from the shares allotted to them as part of their pay.
It’s also an indication that ByteDance, which is the world’s most valuable startup at over $200 billion, is in no rush to go public as Beijing increasingly scrutinizes Chinese tech giants.
According to the sources, ByteDance will now allow restricted shares held by US employees to be transferred as long as sufficient time has elapsed. The company previously specified a “liquidity event” such as an IPO or corporate sale as a condition for the lockup period to occur, the sources added. Once the shares have vested, employees can exchange them for cash through one of ByteDance’s share buyback programs.
Employees were informed of the changes on Tuesday, the sources said. A ByteDance spokesperson confirmed that the company changed its stock allocation rules but declined to comment on the details.
“Our goal is to offer our employees competitive compensation. We have announced an internal solution that will allow our US-based employees to participate in future share buyback programs,” the spokesman said.
The move affects ByteDance’s US employees, which includes about 7,000 TikTok employees.
The rule change has a downside for some employees, the sources said. According to the sources, the transfer of shares will now be considered a US taxable event, even for employees who did not sell their shares. Employees would have to pay the tax out of pocket or sell some of their stock to cover those costs, the sources said.
The separation between transferring shares and taking a company public is referred to in the start-up world as eliminating the “double trigger” and can come with a heavy tax burden. Payments processor Stripe, which is awaiting its IPO, used some of its proceeds from a $6.5 billion funding round earlier this year to help pay for tax expenses for itself and its employees related to the Double Trigger’s abolition.
According to the sources, ByteDance initiated share buyback programs for employees worldwide in 2017 and most recently launched one in April. Previously, these programs were not available to US employees who did not have fully vested stock.
According to the sources, the company plans to launch another buyback program in the fourth quarter of 2023.
20% of ByteDance is owned by its employees, while 60% is owned by global investors and 20% is owned by the founders.
The US employees have come under heightened political and regulatory scrutiny over US concerns that ByteDance could leak TikTok user data to Chinese authorities.
TikTok, used by more than 150 million Americans, insists it “has not and would not share US user data with the Chinese government and has taken significant measures to protect the privacy and security of TikTok users.” .
While it has so far been spared a planned federal ban, Montana’s TikTok is facing a deadlock that is putting it in doubt. The White House has banned TikTok on government-issued devices.
Reporting by Echo Wang in New York Additional reporting by Krystal Hu in New York Edited by Greg Roumeliotis and Anna Driver
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