The TikTok fortune of Republican billionaire Jeff Yass threatened by Washington

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The TikTok fortune of Republican billionaire Jeff Yass threatened by Washington

More than a decade ago, ByteDance founder Zhang Yiming sketched out the idea for a new social media company on a napkin in a Beijing cafe.

Faith in Zhang led local partner Jeff Yass’ Susquehanna International Group to invest $80,000 in TikTok’s parent company and follow up with another $2 million a few months later.

SIG, a global quantitative trading company, became Zhang’s first major backer, helping to launch a revolution in social media. SIG now owns about 15% of ByteDance, a stake worth about $40 billion that represents a significant portion of Yass’ net worth, according to people familiar with the matter.

His estimated $30 billion fortune is now hostage to growing geopolitical tensions between the United States and China, as Congress moves forward with a potential ban on the viral video platform in its largest market. vast and most lucrative. A bill requiring ByteDance to divest TikTok or face banning the app on national security grounds could pass the Senate this week before being signed by President Joe Biden.

As TikTok’s fortunes have become tied to politics, Yass has increased his political spending, devoting more than $46 million to Republican candidates and making him the largest donor this election cycle, according to OpenSecrets, a nonprofit organization. non-profit which monitors the financing of electoral campaigns and lobbying. .

But his political efforts were not enough to slow down the TikTok bill, at the center of the battle between Washington and Beijing. “Investors are forced to choose sides,” said Ming Liao of investment firm Prospect Avenue Capital. “Geopolitics is the biggest risk and there is no way to mitigate it. »

Since founding SIG in 1987, Yass has built his business by making many small bets with outsized winning potential. This approach made SIG an options trading powerhouse and gradually became a market maker in more than 600 publicly traded companies, including Alphabet, Microsoft and Goldman Sachs. Its publicly reported positions were worth more than $500 billion at the end of 2023, according to Fintel, an investment research platform.

Yass, a poker enthusiast who got his start in horse racing, pushed the company into venture capital investing. In 2005, SIG focused its efforts on China, then the world’s fastest-growing large economy with a growing middle class.

Since then, SIG has invested more than $3.5 billion in more than 350 Chinese startups, making Yass’ group one of the country’s leading foreign venture capital firms, according to research group ITjuzi. SIG’s holdings include stakes in Chinese semiconductor design and chip design tools groups, as well as a cybersecurity startup.

SIG has not yet faced scrutiny in Washington, where lawmakers have investigated the investment activities of many U.S. venture capitalists in China. Two of the groups, Silicon Valley venture capital firms Sequoia Capital and GGV Capital, decided in 2023 to split their businesses in response to pressure from tech investors to divest from China.

Under pressure, Yass goes on the offensive. He is a major funder of the Club for Growth, an influential right-wing group, and the largest donor to Protect Freedom PAC, a Republican superpolitical fundraising action committee aligned with Senator Rand Paul, who s opposes the ban on TikTok.

Trump, who previously attempted to ban TikTok, has since changed his stance on the app, saying in March that banning it would only serve to benefit Facebook, after meeting with Yass and speaking at an event of the Club for Growth. The group also paid Kellyanne Conway, a former senior political adviser to Trump, to conduct a poll linked to TikTok.

Trump said he did not discuss TikTok with Yass. A spokesperson for Yass said the billionaire has never contributed to Trump and has no plans to do so.

Nearly half of the 15 Republicans who voted against a TikTok bill passed by the House in March counted SIG or the Club for Growth among the campaign’s top donors, according to OpenSecrets data.

One of the negative votes was that of Alexander Mooney of West Virginia, who received $2.4 million in support from the Club for Growth and the Protect Freedom PAC for his Senate bid.

A spokesperson for Mooney did not respond to requests for comment. “I’m proud to have stood with President Trump on this,” he told West Virginia radio station MetroNews in March.

SIG’s investments in China go beyond ByteDance. Unlike traditional venture capital firms, the investment arm is internally funded, meaning it only invests partners’ money, rather than raising capital from external sources such as venture funds. pension and endowment.

SIG’s structure also means that ByteDance’s earnings go directly to Yass and his co-founders rather than to outside sponsors. ProPublica, a nonprofit investigative media outlet that examined Yass’ tax returns, said ByteDance’s stake represented a large portion of Yass’ wealth and estimated that he owned 75 percent of SIG.

This structure has shielded the company from the blow of U.S. China policy because it does not have to answer to institutional investors. But new rules unveiled by the Biden administration last year would limit SIG’s ability to invest in Chinese artificial intelligence, semiconductors and quantum computing.

It is not clear whether the decree, which is still in the consultation phase, would force SIG to divest its Chinese holdings in these sectors. ITjuzi data shows that of SIG China’s 389 deals, 49 were for AI-related start-ups and five were for microchip companies, although the group slowed the pace of investment in China last year .

Some investments concern sensitive sectors. For example, Yass’s group is the largest outside investor, with a 14 percent stake, in Beijing Xindun Times Technology, or Trusfort, which provides cybersecurity solutions to several public groups and government offices, including the Ministry of Defense. Public Safety and the country’s Ministry of Public Safety. powerful internet regulator, according to public records.

Trusfort’s website states that it “performs in depth the [Communist] the party and government’s efforts to build a powerful cyber nation” and that he has “demonstrated great responsibility and achievements in the advancement of the party and national affairs.” Founder Guo Xiaopeng was recently appointed to Beijing’s top political advisory body.

A spokesperson for SIG and Yass said SIG China does not invest in companies engaged in government surveillance or for which AI is the primary business driver and said Trusfort provides consumer fraud protection for banks and brokerage houses.

For SIG, no Chinese startup has been a bigger winner than TikTok owner ByteDance. After funding ByteDance’s seed round, Yass’ group invested “hundreds of millions” more in subsequent funding rounds, according to US court records.

If TikTok is banned, it will dent Yass’s fortunes, said Li Chengdong, director of internet think tank Haitun. “Now the most likely outcome is that they will shut down the US and all US investors in ByteDance will bear the losses,” Li said.

“[Yass] did what it had to do, but no financier can do anything about the overarching US goal of containing China.”

Additional reporting by Nian Liu in Beijing

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