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ByteDance to sell securities business as regulatory walls close in

Written by Jiaxing Li Published on     2 mins read

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China’s tech firms were determined to step up financial services, but a new regulatory landscape has dashed that dream.

TikTok’s parent company ByteDance is preparing to sell its brokerage business and is expected to depart from this sector completely, Chinese media LatePost reported on Wednesday.

The valuation of ByteDance’s securities platforms, Songshu Zhengquan (“Squirrel Securities”) and Haitun Gupiao (“Dolphin Stocks”), are altogether worth around RMB 500 million to RMB 1 billion (USD 77–144 million). ByteDance has reportedly reached out to investment institutions including CICC, CITIC, and Fosun Group, two of which responded with the intent to purchase these operations.

ByteDance didn’t immediately respond to KrASIA’s request for comment.

The internet conglomerate operates two main business lines in the fintech sector. Squirrel Securities has been providing stock brokerage services for Hong Kong and US stocks for users in Hong Kong since late 2019. Dolphin Stocks is a market data provider catered to users in mainland China and has been operational since 2017.

ByteDance has a third brokerage platform called Star Security, but it has not been released for public use.

The company has never prioritized its business in the fintech sector, according to a source who spoke to LatePost. Analysts suggest the sale of subsidiaries that operate in finance is a consequence of regulatory changes that ByteDance believes will take place soon.

Chinese tech giants have given themselves a leg up in the fintech sector by utilizing the massive troves of personal information amassed from their users, think tank 01Caijing’s director Yu Baicheng told Jiemian. Examples include Alibaba affiliate Alipay and Tencent’s ubiquitous WeChat Pay.

Alipay was set to kick off a record-shattering USD 37 billion IPO in early November 2020, but the offering was scuttled at the last minute when regulators said its rapid expansion into finance posed a “systemic risk” to society. In May, Tencent was ordered to set up a new financial holding company that would be supervised by China’s central bank.

Major tech firms in China don’t just build their own financial products, they also invest in other enterprises that offer these services. For instance, Tencent is a backer of Futu, which has more than 15 million users and doubled revenue and earnings in the second quarter of 2021, according to its latest financial results. These business ties have so far not attracted the attention of regulators.

While ByteDance prepares to sell its brokerage platforms, the company said it will continue to facilitate basic payment services through Douyin Pay. In January, the company launched Douyin Pay for TikTok’s sibling app, a short video platform that is hugely popular in China. The payment channel allows its 600 million monthly active users to tip livestreamers and pay for goods through Douyin’s e-commerce vertical.

Read this: Ant Group searches for direction in a new era of Chinese fintech

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