TikTok US employees will be able to cash out their shares in the coming months -...

TikTok US employees will be able to cash out their shares in the coming months

TikTok US employees will be able to cash out their shares in the coming months

Rebbeca Ren

posted on July 13, 2023 2:38 am

Previously, US employees could only cash out their shares if the company went public or was sold.

TikTok's US employees will be able to cash out their shares, which are a significant part of their annual compensation, in the coming months, Reuters reported, citing people familiar with the matter.

ByteDance, the parent company of TikTok, usually launches stock option buybacks twice a year for employees.

Before this change, only non-US employees could participate in the share buyback program. US employees, on the other hand, were subjected to a "liquidity event," such as an Initial Public Offering (IPO) or a company sale, as a prerequisite for their share vesting to take effect.

Now restricted stock units (RSUs) held by US employees will be allowed to vest if enough time passes, the sources said. Once vested, employees can exchange the shares for cash in ByteDance's stock buyback program. RSUs are a form of equity compensation that a company grants to its employees, but have no tangible value until they vest.

The move applies to ByteDance's US workforce, which includes about 7,000 TikTok employees.

The morale of TikTok's US employees has been significantly impacted due to earlier constraints on vesting, given that RSUs may accounted for 10% or more of their annual compensation.

Some Chinese employees working at TikTok US took to anonymous workplace social platforms Maimai and 1point3acre to vent their frustration with the company. They criticized the company for awarding RSUs that felt like a "check" that couldn't be cashed, primarily due to TikTok's seemingly distant IPO prospects under increasing US scrutiny. 

Sentiments like, "TikTok is unlikely to go public anytime soon under such pressure, rendering our RSUs practically worthless," were commonly echoed on these platforms.

However, with the change in vesting policy, the spirits among the US staff could also be lifted.

"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," a ByteDance spokesperson told Reuters.

The company is planning to launch another buyback program in the fourth quarter of 2023, sources said.

Employees own 20% of ByteDance, while 60% is owned by global investors, and 20% by its founders.

ByteDance has implemented a buyback program at $155 per share in April following a funding round led by Abu Dhabi-based artificial intelligence firm G42, which valued the company at $220 billion. The latest valuation is a significant drop from the $300 billion valuation set in ByteDance's share buyback program last September.