The move is aimed at appeasing restless employees who have been waiting for an initial public offering to profit from the shares they have been awarded as part of their compensation.
It is also an indication that ByteDance, whose worth in excess of $200 billion makes it the world’s most valuable startup, is in no rush to go public amid Beijing’s heightened scrutiny of China‘s technology giants.
ByteDance will now allow restricted shares of US employees to vest as long as sufficient time has passed, the sources said. The company previously set a “liquidity event”, such as an IPO or company sale, as a condition for the vesting to occur, the sources added. Once vested, the shares can be exchanged by the employees for cash in one of ByteDance’s stock buyback programs.
The employees were informed of the changes on Tuesday, the sources said. A ByteDance spokesperson confirmed that the company has changed its share vesting rules but declined to comment on the 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.
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The move applies to ByteDance’s US employees, which include about 7,000 TikTok employees. The changing of the rules has a downside for some employees, the sources said. The vesting of the shares will now be considered a US taxable event, even for employees who have not sold their shares, according to the sources. The employees will have to pay the tax out of their own pockets or sell some of their shares to cover that expense, the sources said.
ByteDance typically launches stock buyback programs once a year for employees globally, according to the sources. Such programs were not previously accessible to US employees that did not own fully vested stock.
Employees own 20% of ByteDance, while 60% is owned by global investors, and 20% by its founders.
The US employees have faced heightened political and regulatory scrutiny because of US concerns that ByteDance may be sharing TikTok user data with the Chinese authorities.
TikTok, which is used by more than 150 million Americans, insists it “has not shared, and would 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 contemplated federal ban, TikTok faces a block in Montana, which it is challenging. The White House has banned TikTok on government-issued devices.
