Mutual Fund Encounters with Gliding Problems on TikTok


Maybe the easiest way to avoid the bear market that events happening in 2022 destroyed the public technology and the stock value of social media is to own a private company and set your own price on it.

This is a latent risk disclosed recently and a lesson that all the major fund companies should learn from, that is how should major fund companies evaluate their stocks of ByteDance. ByteDance is a social media platform owned by TikTok. According to the latest disclosure of investing portfolio, as of September 2022, the stock value contrasted sharply to publicly traded peer situations.

截屏2023-03-31 11.03.37.png

BlackRock BLK, Fidelity, T.Rowe Price TROW have bought a bunch of fund stocks from ByteDance. Although position for each fund normally doesn’t account for 1% of each portfolio, the majority of income from ByteDance comes from customized advertisement to meet customers’ needs. Because the economy cools down, advertisement expense reduces and at the same time, Apple has changed the privacy policy, the pulse of the social media apps- customer data’s inflow has been restrained. What’s more, the restructuring of social media business mode brings pressure to revenue increase and profit.

截屏2023-03-31 11.04.02.png

All of these downsides have brought a hailstorm to social media companies on list. The stock price of Meta, who owns the competitor of TikTok- Instagram has declined by more than 60% from September 2021 to September 2022. The continuous decline in Meta's share price is ostensibly due to a lower revenue outlook for the first quarter of 2022 than analysts expected, especially since the world's largest online network has hardly gained any new users in the past quarter and the number of daily active members has fallen by 1 million in three months. Snapchat SNAP, which is known as short-form video company on the market, a strong competitor of TikTok in winning customers’ attention, fell more than 86 percent during that period. Snap's third-quarter revenue of $1.13 billion was up 6% year-over-year, slightly below analysts' estimates of $1.14 billion, and shares tumbled 25% after hours, down 90% from their peak last September. ByteDance faces the same problems as these and others. It is unprofitable; According to a report in the Wall Street Journal in early October, the company lost more than $7 billion in operating in 2021. Some U.S. regulators and politicians have also advocated to ban the app, or persuaded the company to change the business modern. The reason is that they concerned the app would violate national security.

截屏2023-03-31 11.04.25.png

UBS analyst Lloyd Lloyd Walmsley expressed a similar view in a note: "In our view, the key issue is to understand how much of this impact comes from macroeconomic weakness (from which the company eventually recovers) compared to TiKTok's competitive impact (multiple risks)".

There is a cycle in the economy, and even if a company's income decreases for a period of time due to short-term macroeconomic weakness, it will resume growth as the economy recovers.

But if the revenue declines are due to a change in the competitive landscape, or because advertisers and users are shifting their attention to other platforms, such as TikTok. Unless Snap makes a fruitful adjustment, this decline will persist for a long time until Snap falls into the abyss and becomes an antique of the previous era.