British investor builds $500mn stake in TikTok owner

{"text":[[{"start":7.85,"text":"A London-based tech investor has quietly accumulated a ByteDance stake worth more than $500mn, betting that the Chinese social media and AI group is undervalued compared with its Silicon Valley rivals. "}],[{"start":20.299999999999997,"text":"Fred Blackford, who heads up Future Positive Global, started buying stock in TikTok’s parent company on the secondary market last year, over which time its valuation has doubled from less than $300bn to close to $600bn today. "}],[{"start":35.699999999999996,"text":"His investment came as ByteDance’s outlook was hit by a years-long geopolitical saga over the fate of TikTok in the US, as well as a Biden-era executive order that prevented US funds from investing in private Chinese companies in “sensitive technologies” such as AI. "}],[{"start":53.75,"text":"Blackford said these issues, combined with a broader trend among American investors to sell down their Chinese holdings, gave him an opportunity to buy into the global tech giant. "}],[{"start":64.45,"text":"“There was a real mismatch between what a high-quality business we knew it to be versus what it was priced at,” Blackford told the FT. “We regard it as one of the most high-quality AI companies on the planet. And yet, since the beginning of last year, it was almost trading like a Benjamin Graham-style cigar butt.” "}],[{"start":null,"text":"

"}],[{"start":83.2,"text":"ByteDance has grown rapidly beyond its origins in 2012 as a developer of news aggregator Toutiao. TikTok and its Chinese sister app Douyin are both huge advertising and ecommerce platforms, while its chatbot Doubao, launched in 2023, is China’s most popular consumer AI app. "}],[{"start":102.2,"text":"However, that success has brought scrutiny in the US and China. Both the Biden and Trump administrations have throttled Chinese companies’ access to the powerful chips required to build and run AI. At the same time, it is unclear when and where ByteDance might be able to go public. "}],[{"start":119.45,"text":"Blackford said that looking past those challenges, Future Positive felt ByteDance was one of the “most interesting investment opportunities that we had come across”. "}],[{"start":128.25,"text":"“Even if ByteDance was valued as a Chinese public technology hyperscaler, there’s still a massive [earnings multiple] gap to converge [with Tencent, Alibaba and Baidu]. And then you compare that with the US, so there’s another step up as well,” he added."}],[{"start":144.75,"text":"Before buying any shares, Blackford, who also runs a US-based venture capital firm and has previously led deals in Pinterest and Beyond Meat, consulted other overseas investors in Chinese tech. "}],[{"start":156.85,"text":"They included Li Lu, the Chinese-American founder of Seattle-based Himalaya Capital, and James Anderson, who backed ByteDance while at Baillie Gifford, before moving to the Agnelli family’s Lingotto in 2023. "}],[{"start":null,"text":""}],[{"start":169.2,"text":"Lu helped him “understand the dynamics and realpolitik of Chinese entrepreneurs building companies in China in a way that is sustainable”, Blackford said, while “long-term oriented” Anderson “helped me in recognising what a high-quality company ByteDance is”. "}],[{"start":183.14999999999998,"text":"Blackford assembled a group of primarily European and Asian investors who shared his thesis, then went hunting for ByteDance stock — a process he describes as “more akin to investigative journalism than investing”. "}],[{"start":195.79999999999998,"text":"“You’re identifying who are the main investors, understanding who their [limited partners] are and making an educated guess on who may be sitting on a big mark-up and interested in liquidity,” he said. “Then you are either cold calling or looking for mutual friends or associates . . . It’s been a grind.”"}],[{"start":214.39999999999998,"text":"Future Positive constructed its stake through a “handful” of transactions, dealing with both US and international investors. ByteDance itself was not involved in the process and did not respond to a request for comment on its new investor. "}],[{"start":227.64999999999998,"text":"“The philosophy of this investment goes back to the Warren Buffett punchcard idea: that in your career you may be lucky enough to get 20 punches on a slot card,” Blackford said. "}],[{"start":235.89999999999998,"text":"Despite acknowledging what he called the “idiosyncratic risk” of making big bets on Chinese tech companies at a time of strained relations between Washington and Beijing, Blackford said Future Positive intends to keep building its ByteDance position. "}],[{"start":250.54999999999998,"text":"“We are still net buyers for as long as the business is attractive and the price is fair. I expect that will persist for some time.”"}],[{"start":265.29999999999995,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1776450064_9115.mp3"}