Investing.com -- Major shareholders of Xiaohongshu, a Chinese social media platform similar to Instagram, are in discussions to sell their shares at a valuation of at least $20 billion, Bloomberg News reported today.
The potential buyers include Tencent Holdings Ltd (F:NNND)., among others, as the threat of a TikTok ban in the United States looms.
Investment firms GGV Capital, GSR Ventures, and Tiantu Capital are said to be in negotiations to sell a portion of their stakes in Xiaohongshu.
Other funds expressing interest in the deal include HongShan Capital Group, previously known as Sequoia China Capital, and Hillhouse Investment, according to individuals with knowledge of the situation. Tencent is also contemplating purchasing more shares in the company.
If successful, the deal will elevate Xiaohongshu's valuation to levels last witnessed during its peak in 2021. This comes as the social media company sees an influx of American users migrating from TikTok.
The industry anticipates that this could positively influence an initial public offering (IPO) expected to occur this year, contingent on market conditions.
However, the deal is not yet finalized as existing shareholders have the right of first refusal and priority to buy shares in any sale. The transaction may not proceed if potential buyers choose to wait, especially given the uncertainty surrounding TikTok's status.
Xiaohongshu, seen as one of the viable alternatives to TikTok, has recently gained traction and became the most downloaded free app on iOS for the first time this week.
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