AsianFin -- Backers of China's Xiaohongshu are exploring the sale of a portion of their stake to companies like Tencent, among others, in a deal that could value the popular TikTok rival at a minimum of $20 billion, according to a Bloomberg News report on Thursday.
Shareholders such as GGV Capital, GSR Ventures, and Tiantu Capital are negotiating to offload part of their holdings, with funds like HongShan Capital Group (formerly Sequoia China Capital) and Hillhouse Investment also expressing interest. Tencent is reportedly weighing the option to purchase additional shares. These talks come as Xiaohongshu prepares for an initial public offering, possibly later this year, if market conditions allow.
The deal could return Xiaohongshu’s valuation to its 2021 peak, just as the platform gains popularity among American users looking for alternatives to TikTok. Despite the growing interest, the sale is still pending due to existing shareholders' right of first refusal. Negotiations could still fall through if prospective buyers delay decisions, especially with the ongoing uncertainty surrounding TikTok.
Founded in 2013, Xiaohongshu has grown from a travel and shopping guide for Chinese tourists into a social media platform with about 300 million monthly active users. The company’s user base surged as it expanded into reviews, live shopping, and lifestyle content. Despite challenges facing China’s startup ecosystem, Xiaohongshu is poised to double profits to over $1 billion in 2024, according to Bloomberg News.
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