BEIJING – Chinese technology giant ByteDance has announced plans to repurchase employee stock options at $160 per share, an increase from the previous offer of $155 made in April earlier this year. The move aims to boost employee motivation and inject confidence after a challenging period for the company.
ByteDance is the parent company of popular short video app TikTok and one of the world’s most valuable startups. However, it has faced growing regulatory scrutiny in China and abroad.
In the U.S., lawmakers have raised concerns over TikTok user data being accessed by the Chinese government. TikTok CEO Shou Zi Chew was questioned by Congress in March about data privacy and security practices. This led to a slump in ByteDance’s valuation and cast doubt over TikTok’s future growth prospects.
At the same time, Beijing has tightened regulations for tech companies, impacting major players like ByteDance. New rules were introduced around data collection, content recommendations, and use of algorithms.
These challenges have taken a toll on company morale and stock options value. The share buyback program aims to address this by rewarding long-standing employees.
Details of the Share Buyback Offer
In an internal memo sent to staff outside the U.S. on Wednesday, ByteDance announced it is willing to buy back employee restricted stock units (RSUs) and options for $160 per share.
This is an increase from the previous offer price of $155 made in April. U.S. employees received the same terms earlier this year.
Participation in the share buyback scheme is optional. Employees who hold vested RSUs or options can choose to sell them back to the company at the offered price.
The repurchased shares will be canceled by ByteDance. This allows employees to gain liquidity on their equity compensation before an IPO or acquisition.
Boosting Employee Confidence
According to a ByteDance spokesperson, the share buyback program aims to motivate employees and build confidence in the business.
It provides an opportunity for longer-tenured staff who received stock options at lower prices to realize some return on their ownership stake.
The increased repurchase price suggests ByteDance management sees potential for future growth and wants to retain talent.
Despite regulatory uncertainties, the company likely feels its long-term outlook remains strong. TikTok continues gaining users globally, while ByteDance’s other apps like Douyin and Toutiao enjoy dominant positions in China.
Offering liquidity and upside to employees is a signal of faith in future prospects post-pandemic. It may also incentivize workers to remain invested in the company’s mission.
Challenging Times for ByteDance
The share buyback comes during a rocky period for ByteDance since its meteoric rise to a reported $400 billion valuation in 2020.
In 2021, Beijing strengthened oversight of internet platforms and algorithms. This led to tightened limits on user data collection and more controlled content recommendation practices.
As a high-profile tech leader, ByteDance had to fall in line with the new regulations. This likely hampered some of its operations and forced product changes.
TikTok has also faced ongoing turbulence in one of its top markets, the U.S. Lawmakers raised concerns over data privacy and ties to China. Some advocated for an outright TikTok ban, though this did not materialize.
The scrutiny nonetheless cast doubts over TikTok’s future American growth at a time when it strives to broaden its e-commerce and advertising capabilities.
These setbacks, along with the tech sector rout, saw ByteDance’s valuation plunge to around $300 billion. It also slipped down the ranks of the world’s most valuable startups.
After stunning growth fueled by the pandemic, ByteDance has entered a new phase of uncertainty and slower expansion. The share repurchase underscores efforts to stay resilient and united internally during challenging times.
Outlook Going Forward
Despite current headwinds, ByteDance retains strengths that could power future opportunities.
TikTok now boasts over 1 billion monthly active users globally, making it one of the world’s most popular apps. It continues gaining share of the critical U.S. market despite political tensions.
ByteDance’s China-focused apps like Douyin and Toutiao have even larger user bases in one of the biggest mobile markets.
The company is also leveraging its tech capabilities and content strengths to expand into new areas like e-commerce and cloud services.
While ByteDance faces an uncertain macro environment and tighter regulation, its core business remains robust. Providing liquidity to employees could lay the groundwork for reaccelerating growth when conditions improve.
Ultimately, ByteDance aims to emerge strongly from recent challenges. Rewarding loyal employees is seen as key to maintaining talent and morale during difficult periods on the path to future success.