Jeff Yass’s Susquehanna Worldwide Group first invested $80,000 in ByteDance, the Chinese language proprietor of TikTok, on the again of an thought sketched on a serviette in a Beijing espresso store greater than a decade in the past.
His world quantitative buying and selling agency adopted up with one other $2mn months later, turning into the primary large backer of ByteDance founder Zhang Yiming and serving to to kick-start a social media revolution.
SIG now owns roughly 15 per cent of ByteDance, a stake price about $40bn that represents a big chunk of Yass’s web price, in accordance with folks conversant in the matter.
His estimated $30bn fortune is now hostage to rising geopolitical pressure between the US and China, as Congress strikes ahead with a possible ban of the viral video platform in its largest and most profitable market. A invoice requiring ByteDance to divest TikTok or face having the app banned over nationwide safety considerations handed within the Senate on Tuesday and is predicted to be signed by President Joe Biden on Wednesday.
As TikTok’s destiny has change into intertwined with politics, Yass has elevated his political spending, laying out greater than $46mn for Republican candidates and making him the biggest donor of this election cycle, in accordance with OpenSecrets, a non-profit organisation monitoring marketing campaign finance and lobbying.
However his political outlays weren’t sufficient to sluggish the TikTok invoice, which sits on the centre of the battle between Washington and Beijing. “Buyers are being compelled to choose sides,” stated Ming Liao of funding agency Prospect Avenue Capital. “Geopolitics is the largest danger and there’s no strategy to mitigate it.”
Since founding SIG in 1987, Yass has constructed a enterprise on making many small bets with the potential for outsized payouts. The method turned SIG into an choices buying and selling powerhouse, and it steadily grew right into a market maker in additional than 600 publicly traded firms together with Alphabet, Microsoft and Goldman Sachs. Its publicly reported positions had been price greater than $500bn at finish of 2023, in accordance with Fintel, an funding analysis platform.
Yass, an avid poker participant who received his begin with horseracing, pushed the agency in the direction of enterprise investing. In 2005, SIG targeted its efforts on China, then the fastest-growing giant economic system on the earth with an exploding center class.
Since then, SIG has put over $3.5bn into greater than 350 Chinese language start-ups, making Yass’s group among the many main overseas enterprise capital companies within the nation, in accordance with analysis group ITjuzi. SIG’s stakes embody holdings in Chinese language teams designing semiconductors and making chip design instruments, in addition to a cyber safety start-up.
SIG has but to return beneath scrutiny in Washington, the place lawmakers have been investigating the funding actions of many American enterprise capitalists in China. Two of the teams, Silicon Valley enterprise capital companies Sequoia Capital and GGV Capital, determined in 2023 to cut up their operations in response to the push for tech buyers to disengage from China.
Below stress, Yass has gone on the offensive. He’s a prime backer of Membership for Progress, an influential rightwing group, and the primary donor behind Shield Freedom PAC, a Republican fundraising super-political motion committee aligned with senator Rand Paul, who opposes the TikTok ban.
Trump, who as soon as tried to ban TikTok, has since reversed his place on the app, saying in March that banning it could solely serve to learn Fb, after assembly Yass and talking at a Membership for Progress occasion. The group additionally paid Kellyanne Conway, a former senior Trump political adviser, to do TikTok-related polling.
Trump has stated he didn’t focus on TikTok with Yass. A Yass spokesperson stated the billionaire by no means contributed to Trump and had no plans to take action.
Practically half of the 15 Republicans who voted in opposition to a TikTok invoice that handed the Home in March counted SIG or the Membership for Progress as prime marketing campaign donors, in accordance with information from OpenSecrets.
One of many nay votes was from West Virginia’s Alexander Mooney, who has acquired $2.4mn in help from the Membership for Progress and the Shield Freedom PAC for his senate bid.
A spokesperson for Mooney didn’t reply to requests for remark. “I’m proud to have stayed with President Trump on this one,” he advised West Virginia radio station MetroNews in March.
SIG’s investments in China transcend ByteDance. In contrast to conventional enterprise capitalists, the funding arm is internally funded, which means it invests solely companions’ cash, reasonably than elevating capital from exterior sources comparable to pension and endowment funds.
SIG’s construction additionally signifies that the ByteDance positive factors accrue on to Yass and his co-founders as an alternative of out of doors restricted companions. ProPublica, a non-profit investigative journalism outlet that has reviewed Yass’s tax returns, stated the ByteDance stake accounted for a significant a part of Yass’s wealth and estimated he owned 75 per cent of SIG.
The construction has insulated the agency from the whiplash of US politics on China, because it doesn’t must reply to institutional buyers. However new guidelines unveiled by the Biden administration final yr would restrict SIG’s skill to spend money on Chinese language synthetic intelligence, semiconductors and quantum computing.
It’s unclear if the chief order, which continues to be within the session stage, would pressure SIG to divest its Chinese language holdings in these sectors. Information from ITjuzi exhibits that out of SIG China’s 389 offers, 49 had been in AI-related start-ups and 5 in chip firms, although the group did sluggish the tempo of China funding final yr.
Among the investments are in delicate sectors. For instance, Yass’s group is the biggest exterior investor, with a 14 per cent stake, in Beijing Xindun Instances Expertise, or Trusfort, which gives cyber safety options to a number of state-owned teams and authorities places of work together with the Ministry of Public Safety and the nation’s highly effective web regulator, in accordance with public data.
Trusfort’s web site says it’s “deeply finishing up the [Communist] social gathering and authorities’s efforts to construct a robust cyber nation” and that it has “demonstrated nice accountability and achievement in advancing the social gathering and nationwide affairs”. The founder Guo Xiaopeng was lately named to Beijing’s prime political consultative physique.
A spokesperson for SIG and Yass stated SIG China didn’t spend money on firms engaged in authorities surveillance or for which AI was the first enterprise driver and stated Trusfort provided shopper fraud safety for banks and brokerages.
For SIG, no Chinese language start-up has been a much bigger winner than TikTok proprietor ByteDance. After funding ByteDance’s seed spherical, Yass’s group put in “a whole bunch of hundreds of thousands” extra in subsequent funding rounds, in accordance with court docket data within the US.
If TikTok is banned, it should dent Yass’s fortune, stated Li Chengdong, head of web think-tank Haitun. “Now the almost definitely end result is they are going to shut down the US, and all of the American buyers in ByteDance will bear the losses,” Li stated.
“[Yass] did what he needed to do, however there may be nothing one financier can do within the face of America’s overarching intention of containing China.”
Extra reporting by Nian Liu in Beijing
