EXCLUSIVE: TikTok parent company ByteDance allows US employees to cash out equity sources

NEW YORK, July 11 (Reuters) – ByteDance, the Chinese owner of the short video app TikTok, will allow shares owned by American employees to vest without waiting for the company to list on the stock market, thus allowing them to withdraw cash, according to People. familiar with the matter.

The move is meant to appease restless employees waiting for an initial public offering (IPO) to cash in on the shares they were given as part of their compensation.

It’s also an indication that ByteDance, whose $200 billion valuation makes it the world’s most valuable startup, is in no rush to go public amid Beijing’s growing scrutiny of China’s tech giants.

The sources said ByteDance will now allow restricted shares held by US employees to vest as long as enough time has passed. The sources added that the company previously specified a “liquidity event,” such as an IPO or sale of the company, as a condition for the maturity to occur. Once acquired, employees can exchange the shares for cash in one of ByteDance’s share repurchase programs.

The sources said employees were informed of the changes on Tuesday. A ByteDance spokesperson confirmed that the company had changed its stock award rules but declined to comment on details.

“Our goal is to provide competitive rewards for our employees. We announced an internal solution that will make our US-based employees eligible to participate in future share buyback programs,” the spokesperson said.

The move applies to ByteDance’s US employees, which include about 7,000 TikTok employees.

The sources said that changing the rules has a downside for some employees. Stock awards will now be considered a taxable event in the US, even for employees who have not sold their shares, according to the sources. The sources said the employees would have to pay the tax out of their own pockets or sell some of their shares to cover those expenses.

Cutting the link between a stock award and a company going public is known in the startup world as removing the “double trigger,” and it can come with a huge tax bill. Payments processor Stripe, which is awaiting an IPO, used part of its proceeds from a $6.5 billion fundraising round earlier this year to cover tax expenses for itself and its employees associated with removing the double trigger.

ByteDance started stock buyback programs for employees globally in 2017, and most recently launched one in April, according to the sources. These programs were not affordable for American employees who did not own fully vested shares.

The sources said the company plans to launch another buyback program in the fourth quarter of 2023.

Employees own 20% of ByteDance, global investors own 60%, and 20% to its founders.

The US employees have faced intense political and regulatory scrutiny over US concerns that ByteDance may be sharing TikTok user data with Chinese authorities.

TikTok, which is used by more than 150 million Americans, insists it has “not, and will not share, US user data with the Chinese government, and has taken substantial measures to protect the privacy and security of TikTok users.”

While it has so far been spared a perceived federal ban, TikTok faces a block in Montana, which is challenging. The White House banned TikTok on government devices.

(Reporting by Echo Wang) in New York Additional reporting by Crystal Hu in New York Editing by Greg Romeliotis and Anna Driver

Our standards: Thomson Reuters Trust Principles.