ByteDance reorganizes strategic investment team, causes panic

What a roller coaster day for China’s tech industry. TikTok’s parent company ByteDance has dissolved its strategic investment team, sending worrying messages to other internet giants that have expanded aggressively by investing in other companies.

At the beginning of this year, ByteDance reviewed its “businesses’ needs” and decided to “reduce investments in areas that are not key business focuses,” a company spokesperson said in a statement.

ByteDance isn’t halting external investments outright, though; instead, the investment team will be “restructured” and “integrated across the various business lines to support the growth” of its business.

In other words, some members from its strategic investment team, which has backed 169 companies, according to Chinese startup database IT Juzi (some deals may not be public), will be reassigned roles in other business departments and continue to invest there.

The “restructuring” still stirred up a wave of panic in the industry. China’s cyberspace regulator has drafted new guidelines that will require its “internet behemoths” to get its approval before undertaking any investments or fundraisings, Reuters reported, citing sources. Some Chinese media outlets also reported similar drafted rules.

“Behemoths” refer to any internet platform with more than 100 million users or more than 10 billion yuan ($1.58 billion) in revenue, said Reuters’ sources. That rule, if true, will put a slew of Chinese internet giants, from Tencent, Alibaba, Pinduoduo, JD.com to Baidu, under regulatory review for their investment activities. Tencent in particular is famous for its expansive investment portfolio, which earns it the moniker “the SoftBank of China.”

In a surprising turn, China’s cyberspace regulator said that the “rumored guidelines for internet companies’ IPO, investment and fundraising are untrue.” Furthermore, the authority will “investigate and hold relevant rumormongers responsible in accordance with the law.”

ByteDance’s motive for restructuring may indeed be to generate more synergies between its external investments and internal businesses. We don’t know for sure yet. But there are signs that China’s antitrust action on its internet darlings are nowhere near the end.

Tencent recently sold a great chunk of its shares in two of its most important allies, Chinese online retailer JD.com and Singaporean video games and e-commerce conglomerate Sea. While antitrust pressure wasn’t cited as the cause for its divestments, speculation is rife that China is continuing to blunt the monopolistic power of its largest interent platforms. A handful of them have received various degrees of fines for violating anticompetition rules, but a pause on their investment game will carry much greater consequences. The question now is who’s next.