ByteDance in talks with banks to borrow over $3B

https://www.reuters.com/technology/bytedance-talks-borrow-up-5-bln-information-2021-09-08/

by spyke112 • 5 years ago

72 109 5 years ago

dotcoma• 5 years ago

$3B, or $4B, or perhaps $5B, they are not sure.

ta9882• 5 years ago

That's what they want based on some artificially made numbers saying "hey look our growth is exponential it will never stop come play with us". Now the banks will have to decide if they are at risk of being the ones with the bullet in the chamber of this russian roulette debt game.

oenetan• 5 years ago

http://web.archive.org/web/20210908121925/https://www.reuter...

https://ghostarchive.org/archive/Eo0an

benjaminwootton• 5 years ago

Why don’t we see more large debt rounds, considering interest rates are so low?

Are they just not publicised as much as equity, or could even the largest unprofitable unicorn not raise and service a $5 billion debt?

rchaud3• 5 years ago

Unicorns have something better than a bank loan; interest-free VC money that costs nothing but equity, which itself is effectively worth $0 otherwise.

throwthere• 5 years ago

That equity ends up being really expensive when unicorns ipo. Unicorns generally don’t raise non-convertible-debt because they simply can’t find lenders willing to take single digit interest rates coupled with even a small chance of failure.

Grustaf4• 5 years ago

Equity is orders of magnitude more expensive than debt.

ttul• 5 years ago

Many big financing rounds include debt. When you see that someone raised $500M, perhaps $100M is debt. It levers the equity investment providing an enhanced return, while reducing dilution for existing shareholders.

jollybean• 5 years ago

There are large debt rounds in businesses that have cash flow, assets and huge operating budgets.

The nature of VC/early-stage is such that it doesn't fit the risk profile for debt.

Companies have no assets to back the debt with, often no consistent revenue etc..

With the insane valuations that companies are getting these days it seems to me that debt would even be more afraid.

Like Clubhouse: 15M users, no revenue, flakey product, no obvious kind of revenue model, $1B valuation. Are you going to loan them $50M at 5% interest? Consider the risk on that.

So if your startup sells some funky kind of new wind turbine, and you do the deployments yourself, you might be able to raise debt to pay for the the installs themselves, because you can do the math on that out for a few years.

So you could raise debt to finance your sales in a way like that.

But it's about a risk profile, and how far out you can predict stable cash flows.

blocked_again4• 5 years ago

3 Billion USD to get children hooked to garbage content, ruin their brains with cheap dopamine and ruin their lives. And it's perfectly legal. What a shit society we live in.

prescriptivist2• 5 years ago

I've never used Tik-Tok but what weirds me out is it seems like there are a ton of people in their early middle to late middle ages desperately making meme videos to try to capture the attention of all these children. It's grotesque.

parhamn• 5 years ago

Children? Everyone I know has one.

sydthrowaway• 5 years ago

I love coming to HN during European hours. Only then is the community is primed to deliver harsh truths.

samhw5• 5 years ago

Is it a harsh truth? It's harsh, that's for sure. It strikes me as unbelievably illiberal and puritanical to suggest that it should be illegal to create content for children which (the speaker considers) is unedifying.

I don't know if it's just me, but I feel like some of these attitudes which are considered progressive nowadays would have made Mary Whitehouse blush. What happened to insisting on a free and pluralistic society?

Spivak• 5 years ago

It’s not even really a harsh truth. It’s just a hot take from someone who only has the most surface level understanding of why people like TikTok.

It’s legitimately the best social network around right now. The content is so freaking good, raw, silly, and spans all walks of life. Whatever they did with the algo makes it extremely high-signal for me and my friends who are on it. I get really high quality content for exactly my niche interests without ever having to spend time searching for it.

FredPret6• 5 years ago

Be the change you want to see - this type of defeatism creates zero progress.

And there has been a lot of progress, those kids would have had to push carts up mine shafts in the previous era.

In the era before that, most of them would have died from hunger or some disease

JoeQuery• 5 years ago

This comment of yours also creates zero progress, so what's your point? In fact it might be even more "harmful" because it implies we should just be okay with anything because in olden times things were worse.

imback• 5 years ago

What? Don't use TikTok? Encourage kids to read a book? The train has passed on this one. Pretty sure it's considered child abuse in the lower 48 if your toddler doesn't have their own smart phone and a 24/7 internet connection. I'm only slightly exaggerating.

throwaway342414• 5 years ago

Not to mention in the era I grew up in (before social media), people had pretty much the exact same complaint, except it was TV rotting kids’ brains (of course, there can be truth to both, but I’m skeptical the present era is uniquely terrible - kids used to watch a lot of TV).

I don’t use TikTok, but I’ve heard anecdotes from users that it’s currently the least-terrible of the social media services, and this doesn’t sound totally implausible to me, given what the competition is.

It seems more productive to focus on the enriching activities that we want more of rather than trying eliminate distracting ones - there are so many of those it’s easy to imagine one distraction just being replaced with another.

pjc505• 5 years ago

"Tiktok or working down the mine" is a terrible false dichotomy.

adventured2• 5 years ago

those kids would have had to push carts up mine shafts in the previous era

No, most kids of the previous era never came within a million miles of pushing a mine cart up a shaft. We have very well documented historical records of what type of work young people were most commonly doing circa 1850-1950, mining was not one of the top activities (nor was any other type of very dangerous hard labor).

I don't much care about kids cloning lame faux dance routines on TikTok, I think it's mostly benign and unimportant. And it's definitely a temporary fad (these kids won't be spending lots of time learning and cloning lame dance routines in 10 second videos ten years from now). It's also exceptionally vapid. I grew up with MTV when it was becoming a thing, and it too was largely vapid garbage (although not entirely, as is true of TikTok), and it culturally melted away just as TikTok will recede with time, as the kids move on to something newer and cooler, as always happens.

The biggest shot against TikTok is that most of the young people on there aren't even producing their own content, they're directly copying other content and repeating it like brainless zombies. Maybe it's no worse than mediocre cultural cloning was in past decades, it's just considerably accelerated and pumped up in terms of projection / audience. It's nothing great to celebrate though, it's a high-fructose soda for the brain (which is why it's so addictive), an intravenous line of cheap validation for nacissists and young people with low self-esteem, not high quality sustenance. MTV didn't lead to an improved outcome for the generation reared on it, and TikTok won't either, there isn't actually much value being created with it. These types of platforms don't matter very much ultimately, in terms of consumption they're mostly just another way to pass the time for bored brains.

dcl• 5 years ago

Indeed, I believe/think TikTok is probably the most psychologically harmful social media app.

Ekaros3• 5 years ago

Haven't ever used it, but I can't imagine it raises above Twitter... That stuff have vile real-life consequences...

buryat• 5 years ago

TikTok is ruining kids brains same way as rock’n’roll did in 50s, MTV did in 90s, and video games did in 2000s

Bayart3• 5 years ago

It's not because those are things we have positive emotional associations with from of our childhood that they're actually positive things. I for one would have rather never played video games or watched MTV.

You remember those old farts, annoying everybody with their sanctimonious imprecations about video games ? They were right.

jdavis703• 5 years ago

I don’t believe rock & roll, music videos or violent video games rot children’s brains (those were moral panics). But the current generation of social media and certain kinds of video game designs are absolutely designed to be addictive. I don’t think culture war stuff is comparable to people engineering software for dopamine hits.

blocked_again4• 5 years ago

Do kids used to watch MTV for hours daily in 90s?

Do they used to watch MTV in School?

Do they used to watch MTV while waiting for bus?

Was their classmates all making videos for MTV?

onlyrealcuzzo• 5 years ago

Sure - in the same way Fentanyl is essentially Aspirin.

RyanHamilton• 5 years ago

I see all this potential, and I see squandering. God damn it, an entire generation pumping gas, waiting tables; slaves with white collars. Advertising has us chasing cars and clothes, working jobs we hate so we can buy shit we don't need. We're the middle children of history, man. No purpose or place. We have no Great War. No Great Depression. Our Great War's a spiritual war... our Great Depression is our lives.

rileymat2• 5 years ago

I guess I am a bit older than the target demographic, but is the content really garbage?

I don't spend much time on it, but there are a lot of original funny bits I have seen people do in the compressed timeframe that are really quite good.

Workaccount2• 5 years ago

The only thing that really bothers me is TikTok has CCP party members sit on its board, that review and have final say on everything.

To me this is a massive liability for the US. It's just a matter of time before China starts to dabble in "content shaping" on the platform, if they aren't already.

dang• 5 years ago

"Please don't fulminate."

"Please don't post shallow dismissals, especially of other people's work. A good critical comment teaches us something."

https://news.ycombinator.com/newsguidelines.html

broknbottle2• 5 years ago

"When I grow up I want to be a influencer"

Ekaros3• 5 years ago

One might actually think that it is positive that bar for these sort of dreams have been lowered and it has become more realistic. Kids wanted to be movie stars, tv celebrities, rock stars or in reality tv. I might consider influencers to be more healthy than any of those...

DLay• 5 years ago

Even if TikTok got banned, we still have Instagram Reels, YouTube Shorts, Snap Spotlight, and whatever Reddit is planning on doing to fill the void. Pandora’s Box has already opened—short video is here to stay.

codingdave• 5 years ago

"to refinance its debt"

So I take that to mean that this is not a new loan of $3B, they are already that far underwater, and are refinancing for better terms.

spyke112• 5 years ago

As I understand it they have already borrowed around $1B, and now because of the lower interest rate, they are able to secure a bigger loan that they'll use to pay back the original and then still have a bucket of cash, at a lower interest.

I don't know about the US, but here in Denmark it has been a common "trick" in mortgage financing as the interest rate dropped over the last couple of decades.

But as with all taking on debt to pay off debt, it's like wetting yourself.

ta9882• 5 years ago

The best part is what happens when they cannot refinance anymore. There is a wall in front of the car, but speeding is fun, so why not accelerate a bit more.

bdsa• 5 years ago

Like wetting yourself... to stay warm?

chollida1• 5 years ago

But as with all taking on debt to pay off debt, it's like wetting yourself.

Feels like something didn't translate well from Danish to English in that saying:)

lotsofpulp• 5 years ago

But as with all taking on debt to pay off debt, it's like wetting yourself.

Taking on debt at a lower interest rate to pay off debt at a higher interest rate is just common sense.

Taking on additional debt just to have a bucket of cash is what can potentially get you in trouble if there is no plan or resolve to use it productively.

kasey_junk• 5 years ago

Having debt doesn’t make a company underwater. If you can use that debt to generate more revenue than it cost to service the debt it makes absolute financial sense to do so.

Basically every major corporation in the world right now has large debt in the form of lines of credit. It’s too cheap not to right now. Especially for a company that doesn’t have easy access to institutional investors.

the_duke• 5 years ago

ByteDance had 37B in revenue in 2020.

A 3B refinancing deal - done at a time of very favorable interest rates - is really a non-story.

iamgopal• 5 years ago

Any idea exact interest rate ? low means in single digit ? 10 ? 4 ?

pphysch2• 5 years ago

The interest rate at which large banks can borrow USD is officially 0-1% and effectively negative due to massive quantitative easing.

alexfromapex• 5 years ago

Except it’s partially-owned by China and there is a possibility that they’re deliberately trying to pull money out of the US economy

Scoundreller• 5 years ago

More likely trying to get money out of China. Getting a US loan against your Chinese assets is a good way to do that.

oliwarner• 5 years ago

Okay, I'll admit to being a little naïve on big finance but holding a debt like this is still going to cost them 30 million a year. If it's "only" 7% of revenue, surely they'd pay the debts off.

Seems more likely all that revenue is sunk into existing costs and they need the loan to remain liquid.

foota• 5 years ago

Of course the revenue is sunk into other things, they're trying to invest as much as possible, and so they're looking for additional funding to grow.

im-poor• 5 years ago

This is such a bad idea for the banks. ByteDance has plenty of money. This is a political move to create domestic impact if the U.S. ever wants to ban TikTok again, which almost happened under Trump.

varsketiz• 5 years ago

Not sure why this is being downvoted?

It makes sense to me that ByteDance wants non-China banks to have skin in the game and share the risk that way.

gigatexal• 5 years ago

if you're printing money like they are of course you would refi debt in the stupid low interest world we live in

Bayart3• 5 years ago

ByteDance had been exploring a public listing in the beginning of 2021, sources have told Reuters, but in April the company said it had no imminent plans for an initial public offering.

Has ByteDance been put on the waiting list by the CCP or is it cold feet from looking at Ant Group ?

rchaud3• 5 years ago

Why dilute ownership if banks can already provide the capital without the hassle of an IPO?

rm_-rf_slash• 5 years ago

So founders can cash out and park their money in a safer place than CCP China.

xyzzy21• 5 years ago

The hard Xi-driven return to Maoism has dried up both funding and operational latitude for most large Chinese companies - tech or otherwise.

Given Xi's family background, combined with his provincial lack of nuance, this isn't remotely surprising.

ByteDance in talks with banks to borrow over $3B

Related Stories