Growing fortune in the world’s most valuable start-up

HONG KONG • Software engineer Zhang Yiming started out producing apps for sharing jokes before focusing on news aggregation. That pivot proved lucrative.

The 35-year-old founder of Bytedance Ltd is worth about US$13 billion (RM52.78 billion), according to the Bloomberg Billionaires Index, making him China’s ninth-richest person and one of the fastest in modern times to amass a mega-fortune.

The business, founded in 2012, has more than one billion active monthly users across eight mobile apps, including a news aggregator powered by artificial intelligence and a video-sharing platform.

His rapid wealth accumulation is a sign that China hasn’t lost its knack for creating mega-rich company founders despite a slowing economy.

It also helps explain why authorities seem to be taking a more tolerant stance toward a corporate structure favoured by the country’s technology tycoons, most of whom have chosen to list their businesses overseas.

Zhang’s fortune is harder to calculate than the founders of Baidu Inc and Tencent Holdings Ltd, in part because his company isn’t yet public.

It’s also difficult because Bytedance is structured in the same way as the two tech behemoths — a complicated ownership system known as a variable interest entity (VIE).

Of the 44 Chinese tycoons on Bloomberg’s wealth index, eight are tech moguls with VIEs listed outside China.

The billionaires’ combined net worth exceeded US$150 billion as of March 21, and their stakes weren’t publicly known until the companies filed with regulators ahead of going public in New York or Hong Kong.

VIEs have never been formally endorsed by the Chinese government. But in an acknowledgement of their importance, officials will soon permit VIEs to go public in the country, allowing them to list on a new technology-focused exchange set to launch in coming months.

Bytedance is, for now, a closely held VIE with a complex structure that involves layers of holding companies.

Its main business, Jinri Toutiao, is ultimately owned by Zhang and Bytedance senior VP Zhang Lidong through a Beijing-registered holding firm, according to China’s National Enterprise Credit Information Publicity System.

Zhang pledged his 98.8% stake to another Beijing company, which in turn is owned by a Hong Kong-registered firm.

That entity, where Zhang is a director, is owned by a company registered in the Cayman Islands.

The principals won’t be disclosed unless there’s an initial public offering prospectus.

The Bloomberg Billionaires Index calculated Zhang’s net worth by pegging his stake at 65% and using the company’s valuation of US$20 billion, a figure provided in 2017 by people with knowledge of the matter. The analysis assumes his stake has been diluted through funding rounds.

Bytedance is said to have secured a US$75 billion valuation in late 2018, making it the world’s most valuable start-up — though the figure isn’t used in the net worth calculation because the details haven’t been confirmed. — Bloomberg