NEW YORK, Jul 11 (Reuters) – ByteDance, the Chinese owner of the short video app TikTok, is allowing shares owned by US employees to vest without waiting for the company to go public, which people say will allow them to are paid familiar with the case.
The move is intended to appease restless employees who have been waiting for an initial public offering (IPO) to take advantage of the stock they were awarded as part of their compensation.
It is also an indication that ByteDance, valued at more than $200 billion is the world’s most valuable startup, is in no hurry to go public amid Beijing’s heightened criticism of the Chinese tech giants.
ByteDance is now allowing restricted shares of U.S. employees to vest as long as enough time has passed, the sources said. The company previously set a “liquidity event,” such as an IPO or business sale, as a condition for the vesting to take place, the sources added. Once vested, the shares can be exchanged by employees for cash in one of ByteDance’s share repurchase programs.
Employees were informed of the changes on Tuesday, the sources said. A ByteDance spokesperson confirmed that the company has changed its stock vesting rules, but declined to comment on the details.
“Our goal is to provide competitive compensation to our employees. We have 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 includes approximately 7,000 TikTok employees.
The rule change has a downside for some workers, the sources said. The vesting of the shares is now considered a taxable event in the US, even for employees who have not sold their shares, the sources said. The employees will have to pay the tax out of pocket or sell some of their stock to cover those costs, the sources said.
Breaking the link between stock vesting and a company going public is known in the startup world as removing the “double trigger,” and can come with a hefty tax bill. Payment processor Stripe, which is awaiting IPO, used part of the proceeds from a $6.5 billion fundraising round earlier this year to cover tax costs for itself and its employees associated with removing the double trigger.
ByteDance started employee stock buyback programs worldwide in 2017 and had last launched one in April, according to the sources. These programs were previously inaccessible to US employees who did not hold fully vested shares.
The company plans to launch another buyback program in the fourth quarter of 2023, the sources said.
Employees own 20% of ByteDance, while 60% is owned by global investors and 20% by founders.
The US employees have faced heightened political and regulatory scrutiny over US concerns that ByteDance may be sharing TikTok user data with Chinese authorities.
TikTok, used by more than 150 million Americans, insists it “has not shared and will not share U.S. user data with the Chinese government, and has taken substantial steps to protect the privacy and security of TikTok users.”
Although spared a contemplated federal ban so far, TikTok faces a bloc in Montana, which is challenging. The White House has banned TikTok on government-issued devices.
Reporting by Echo Wang in New York Additional reporting by Krystal Hu in New York Edited by Greg Roumeliotis and Anna Driver
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