ByteDance disbands investment team amid China’s Big Tech clampdown

The owner of TikTok is pursuing a quieter investment strategy © Shiho Fukada/Bloomberg

ByteDance is disbanding its investment team as Chinese regulators step up antitrust scrutiny of the country’s tech giants.

The company behind short video app TikTok said it had reviewed and taken stock of its various business lines at the start of the year and decided to strengthen its focus and “cut down investing with low synergies”. 

Members of ByteDance’s investment team will be scattered throughout the organisation to “strengthen the strategic research functions co-ordination with our business”, the company said.

The move came as the Chinese Communist party’s campaign has sought to rein in some of the company’s tech giants, such as such as Alibaba and Meituan, leaving other companies to make moves to avoid Beijing’s ire.

The ByteDance investing team had 50 to 100 employees, not all of whom have been assigned new roles, according to one person briefed on the restructuring. The person added that the reassigned team members may continue looking at investment opportunities or do other strategic planning roles within their new business units.

It is the latest restructuring within the TikTok developer. Last year its chair and founder Zhang Yiming stepped down following a geopolitical storm in which the US government, led by former president Donald Trump, tried to force the sale of part of ByteDance’s global business.

The internet company has ploughed money into Chinese start-ups in recent years in an effort to catch up with rival Tencent. Data from ITjuzi shows ByteDance made 76 investments last year, up from 38 the previous year.

Its purchase of Shanghai based start-up in 2017 for around $1bn formed the backbone of TikTok, but the deal remains under review by the Committee on Foreign Investment in the US.

On Wednesday, Chinese media reported that ByteDance’s move came in response to new restrictions being drawn up by the cyberspace administration that would force large tech companies to seek approval before making investments, but later deleted mentions of the new rules from their articles. Reuters cited sources confirming the new rules.

“This means yet more uncertainty for [ByteDance’s] IPO because no one knows what the [Chinese] government is going to do next when it comes to the big internet companies,” a lawyer close to the company said.

The lawyer added: “Internet companies are very concerned. But if they’re looking for a piece of paper with clear guidance on it, they’re not going to get it.”

China’s antitrust regulator has beefed up its staff and tools for reviewing deals, after previously turning a blind eye to the deals done by the country’s companies structured as variable interest entities, for fear of inadvertently endorsing the complicated legal structures they use to bypass foreign investment restrictions.

The anti-monopoly regulator, which recently had its political standing within the government hierarchy raised, has spent more than a year combing through historical deals and penalising companies for not seeking approval of past mergers.

Regulators have fined Tencent over almost three dozen deals, and in March fined one of ByteDance’s units Rmb500,000 for failing to report an investment.

The increased regulatory scrutiny of large internet companies investments has led Tencent, a major backer for many start-ups, to pursue a quieter investment strategy.

The planned stock market flotation of ByteDance has been postponed a number of times, but the company was most recently expected to attempt a listing in Hong Kong or New York early this year.

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