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Susquehanna: How a wealthy Philly trading firm got into TikTok early and could make $15 billion

Susquehanna holds an immense stake in TikTok's newly controversial China-based firm. The question for Susquehanna s how President Donald Trump’s campaign to force a sale of TikTok will play out.

Arthur Dantchik at the Kimmel Center, Philadelphia, 2016
Arthur Dantchik at the Kimmel Center, Philadelphia, 2016Read moreLaura Goldman

Susquehanna International Group, the secretive shop of options masters based in Bala Cynwyd, trades fast and large. But it can also be a patient investor.

Susquehanna made one of its most significant bets in that mode — and may be closing in on a massive payday as a result.

As the earliest U.S. backer of the social media app TikTok, Susquehanna holds an immense stake in the newly controversial China-based giant. The question for Susquehanna now is how President Donald Trump’s campaign to force a sale of TikTok over national security concerns will shake out.

The drama is unfolding just over a decade after the Montgomery County company first recognized the genius of TikTok’s founder, engineer Zhang Yi Ming, and began backing his ventures.

As for Susquehanna, it was founded in 1987 on the floor of the old Philadelphia Stock Exchange by a gang of SUNY-Binghamton grads who had been banned from casinos for using math to beat the house. Its publicity-shy founders, Jeff Yass and Arthur Dantchik, have built it into a powerhouse of 2,000 traders and support people, known for using poker train new hires and for making big bets on small movements in hot stocks and cool bonds.

Susquehanna began backing Zhang before he thought of TikTok. A graduate of the computer science program at a university 70 miles from Beijing, Zhang worked briefly for Microsoft in the United States before developing 99Fang (“99 Rooms"), a travel site. His product impressed Susquehanna’s pioneering China team, which invested in 2009.

Next, Zhang has said, in 2011 he came up with the idea that became TikTok by watching straphangers on a subway under Beijing.

“I noticed that fewer and fewer people were reading newspapers on subways,” he told students at his alma mater, Japan’s Nikkei news service reported. “The sales of smartphones in China also experienced explosive growth in 2011. I thought smartphones would replace newspapers to become the most important medium of information distribution.”

The firm Zhang formed, ByteDance, built an app, Toutiao — “Headlines” — that delivered curated news stories to commuters' phones based on their web surfing. With Dantchik’s support, Susquehanna’s SIG Asia Investments put up $3 million of ByteDance’s $5 million initial investment round in 2012.

Four years later, Zhang added the mobile-based TikTok shoot-your-own video app, a hit that quickly spread worldwide.

Susquehanna also linked up with a group of Chinese and American investors to pour $147 million into, the wildly popular mobile karaoke-video service. In 2019, ByteDance bought for $800 million.

Once these ingredients were in place, TikTok’s growth was so geometric that it has led some politicians and analysts to worry that the app posed a national security threat.

Last year, U.S. Sen. Marco Rubio (R., Fla.) demanded that the U.S. investigate the potential transfers of American users’ private data to China. In January, the U.S. military ordered TikTok deleted from government-owned phones. In August, Trump said he had the power to shut down TikTok if it remained in Chinese hands, pressuring Zhang to find more U.S. partners.

The roles of Susquehanna, Silicon Valley-based Sequoia, and two New York venture capital firms, General Atlantic and Coatue Management — all suddenly in the spotlight as part owners of TikTok — became a public focus.

Last month, ByteDance seemed to have found a way out. It said Oracle and Walmart would buy a total of 20% of the company, leading eventually to a U.S. initial public offering that experts estimated might bring in $75 billion, one of the biggest debuts ever. The New York Times reported Susquehanna’s Dantchik would join three other American owners, plus founder Zhang, on a new board.

The next day, Oracle, however, suggested that an IPO might not be needed to meet Trump’s demand that the firm be put under American control. The ownership stakes of Oracle and Walmart, when joined with those of preexisting investors, might accomplish that, Oracle suggested.

On Sept. 27, a judge in Washington pushed back the deadline on Trump’s attempt to force Apple and Google app stores to drop TikTok. The firm still faces a Nov. 12 ban on U.S. companies doing business with it unless it finds new owners.

On Thursday, the Wall Street Journal, citing data from the Pitchbook data service and unnamed sources, valued Susquehanna’s stake in TikTok at a whopping $15 billion.

Should the IPO occur, would that be enough for Dantchik and his partners to retire, after more than three decades of investing? They didn’t return calls seeking commen