Susquehanna International Group LLP Stands To Make Billions Off TikTok
Susquehanna’s core business surrounds quantitative models and using computers to execute thousands of trades in mutliple markets. These businesses tend to rake in profits by making thousands of small trades a day, often holding securities for fractions of a second. But in the case of TikTok, they made a huge bet and held on to the investment for years.
Susquehanna now has more than 1,900 employees and accounts for more than 20% of U.S. options-trading volume. It had more than $80 billion worth of stocks, options and other securities and derivatives at the end of 2019. Options are contracts that give investors the right to buy or sell a stock at a particular price. In the 1990s, the company became more traditional, initially focusing on private investments in public equity, or PIPEs, a type of deal in which private investors buy equity stakes directly from a publicly traded company.
Later, Susquehanna set up units for venture capital and private-equity investments. As the Internet boom spread to China and more Chinese startups were listed in the U.S. in the 2000s, it launched SIG Asia Investments in Shanghai.
The story starts at the State University of New York at Binghamton, where six of its co-founders were students in the 1970s. They initially had an office in the Philadelphia Stock Exchange. Israel Englander, the billionaire chief executive of hedge-fund firm Millennium Management, helped them get started by sponsoring Susquehanna co-founder Jeffrey Yass for a seat at the exchange. Mr. Yass’s father Gerald also helped set up the firm.
It has been a big player in China. With another large VC, Sequoia, it has invested 36 different times in Chinese companies.
Susquehanna got into ByteDance early, joining a $5 million investing round in 2012, the year the Chinese company was founded. The company’s TikTok app now has hundreds of millions of users globally, about 100 million of whom are in the U.S., many of them teenagers.
Susquehanna with 15% ownership is the largest outside investor in the Beijing-based social-media company. Based on recent trades, Susquehanna's stake could be worth more than $15 billion on paper. Susquehanna also invested in Musical.ly, a video app that was bought by Bytedance in 2017 and later folded into TikTok.
The firm invests only the partners’ money’s so the personal profit from the investment will effect the Forbes richest. Venture-capital firms usually raise funds from outside investors and must share profits with them.
Those in the know say the driving force behind the investment was Tim Gong and Joan Wang, a big early supporter of ByteDance founder Zhang Yiming. The two were executives at Susquehanna’s China venture-capital unit, SIG Asia Investments.
Ms. Wang, an early ByteDance board member, connected potential investors to Mr. Zhang, says Hong Chen, chief executive of Hina Group, a Chinese investment bank and investing firm.
“She was a great helper for ByteDance,” said Mr. Chen, who is friends with Ms. Wang. “She is a very hands-on investor.”
The bridge between ByteDance, Ms. Wang and Susquehanna’s headquarters in Bala Cynwyd, Pa., is Arthur Dantchik, who co-founded the firm with a group of college friends in 1987.
Mr. Dantchik is on the ByteDance board now, he took over Ms. Wang's seat. He would also be a board member of TikTok Global, the proposed U.S.-based spinout that the company is working to create to avoid the app being banned from the U.S. by the Trump administration.
“Susquehanna is like a black hole,“ said Paul Rowady, director of research at Alphacution. “There’s no light that escapes.”
Mr. Dantchik hasn’t played a big role in talks with officials, allowing other ByteDance investors such as Sequoia Capital and General Atlantic to take the lead.