TikTok owner ByteDance dissolves its investment arm

January 20, 2022: -On Wednesday, TikTok owner ByteDance has disbanded its investment department, a company spokesperson told CNBC.

After an assessment at the starting of the year, ByteDance decided to “strengthen the focus of the business, reduce investments with low connection and disperse employees from the strategic investment department to various lines of business,” the spokesperson said in a Chinese statement which was translated by CNBC.

The company said that the move “strengthens the coordination amid strategic research and the business,” the company said.

The news came as ByteDance is undergoing restructuring since its founder Zhang Yiming stepped down as chairman. The company has invented six business units to focus on different areas, from gaming to enterprise software.

ByteDance is not publicly traded; it is the largest start-up globally, valued at $140 billion, according to CB Insights.

Investments and acquisitions have been a crucial part of Chinese tech giants’ growth over the years. Companies such as Alibaba and Tencent have snapped up smaller players at home and abroad.

ByteDance is aiming to replicate that model, which uses buyouts and investments to push into new business areas. In the previous year, the Beijing-headquartered start-up acquired major mobile gaming studio Moonton and took its first steps into the world of virtual reality by purchasing Pico.

But as Beijing continues to tighten regulation on the domestic tech sector, dealmaking has come under scrutiny. Several tech giants have been fined for failing to report old deals.

On Wednesday, nine government departments, including the increasingly powerful Cyberspace Administration of China, released “opinions” on the healthy operation of internet platform businesses.

The document included calls for strengthening the regulation of these companies’ financial activities.

There are signs that Chinese giants are beginning to divest some of their holdings. In December, Tencent significantly reduced its holding in e-commerce giant JD.com and handed the stake a special dividend to shareholders. And this month, Tencent sold shares in Singapore-based company SEA.

For a sense of how significant Tencent’s investments have grown, an annual report showed the company’s holdings in publicly listed companies in 2020 rose by 785.11 billion yuan ($122.7 billion) — more than the 160 billion yuan in profit reported for the year. That’s not including its subsidiaries.