China’s ByteDance Ltd., the parent company of TikTok, communicated to its employees through a financial report that operating losses for the years 2020 and 2022 have tripled to more than $7 billion.

Apparently, the company spent more than it earned. However, in the first quarter of 2022 it showed a small improvement in its revenues.

The details of the report show that, although the company is rapidly increasing its revenues, accumulating profits and investments, its net results reveal serious losses in market value.

Although ByteDance’s profits grew by almost 80%, some $61.7 billion in 2021, it has fallen short of covering costs, which amounted to $84.9 billion, or 87%.

According to the report, the company’s cost of sales increased by 79% more than the previous year, which shows that in order to achieve higher revenues, the company had to incur several expenses, such as: $14.6 billion in research and development, $19.2 billion in sales and marketing expenses, and $75.6 billion lost to fluctuating changes in market value.

If we compare the company’s losses last year the difference is abysmal. In 2021 operating losses totaled $7.15 billion, compared to previous years which was lower, for example in 2020 losses were $2.14 billion, according to the report.

An email to company employees said, “Though the market may fluctuate, we remain confident in the strength of our business and organization.”

ByteDance sent the financial report to its 30,000 employees, offering them a special issue of company shares.

In previous years, the company made the same offer to its then 130,000 employees, incentivizing them by issuing shares at $195 per share in early 2021 and at $180 in 2020.

Currently, the company is valued at $300 billion, which equates to approximately $170 per share, a lower value.

It should be clarified that the report in question does not separate the various applications of the company ByteDance, which operate in China, such as Douyin, Jinri Toutiao, or Today’s Headlines, but TikTok is the most widely used product in the U.S. and throughout the West.

It seems that complaints from various world leaders and lawmakers about the threats that TikTok poses to users and to the security of countries are having a negative effect on the Chinese social networking giant.

On the other hand, net losses could also reflect the company’s attrition from the Chinese regime’s regulatory crackdown and the CCP’s pressures to control the technology industry.

TikTok negotiates agreements to be able to continue in the U.S.

Following the denunciation of TikTok by several U.S. officials and after the presentation of 80 audios leaked by the newspaper BuzzFeed of internal TikTok meetings, it is known that the CCP accesses U.S. user data from China.

Recently, the Biden administration drafted a preliminary agreement with TikTok to address the national security concerns raised. The Chinese company continues to operate in the United States, with no major changes.

For the past two years, TikTok has been under U.S. legal scrutiny for its links with Chinese Communist Party and accused of being a tool of Chinese espionage.

According to reports, in the draft agreement, TikTok should first store the data only on U.S. servers, possibly managed at Oracle, instead of its own servers in Singapore and Virginia. Second, Oracle is expected to control TikTok’s algorithms. Finally, TikTok would be monitored by U.S. government security experts.

But for some Republican representatives it is not enough and they consider the Biden administration too soft on dealing with China in this regard.

Sen. Marco Rubio of Florida said, “Anything short of a complete separation” of TikTok from ByteDance “will likely leave significant national security.”

In 2020, President Donald Trump tried to force ByteDance to sell TikTok to a U.S. company and even through legal recourse tried to have the app blocked because of the risks it poses to the United States.

In addition, five Republican Party representatives recently introduced a bill that would make it illegal for TikTok employees in China to access U.S. user data.

TikTok has been negotiating with representatives of the Committee on Foreign Investment in the United States (CFIUS) to resolve national security concerns.

Vanessa Pappas, TikTok’s chief operating officer, at a Senate hearing, declined to exclude employees from accessing U.S. data from the app, but said she could work out a deal with the government.

TikTok executives resign from the company

Due to CCP pressures and ties to TikTok, through ByteDance, at least 5 of the CEOs hired resigned in the last two years.

Three of the former chiefs, speaking anonymously for fear of reprisals from the Chinese regime, said that after assuming their positions, they learned that they could not make decisions, but had to obey direct orders from the ByteDance office in Beijing.

Roland Cloutier, the company’s global security director, is one of the senior people who recently resigned from TikTok, but declined to comment.

Employees who worked on TikTok products, engineering and strategy until recently, including those handling sensitive U.S. user data, also said they reported information to ByteDance in China, and did not follow executive orders from TikTok’s CEO.

According to another former boss, the company’s auditor told him that it would be necessary to work with the CCP, even for “U.S.-specific” changes, because the Beijing office controlled access to TikTok’s internal tools.

He said, “Beijing was very mistrusting of me.” He added, “I do business and the way they wanted me to do business was very different.”

“They wanted a pawn or a yes-man,” the person said. “They wanted a paper-pusher or a cog in the wheel, and that’s just not me.”

Now, TikTok is at a crossroads, if it does not resolve the U.S. demands it could lose a massive number of Western users. If it does not improve its financial crisis, it could go bankrupt, but above all, if it continues to obey the Chinese regime, it may be accused of being a spy company. TikTok needs a big lifeline, will it be able to float?

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