Investors are betting that Washington’s mounting scrutiny on TikTok could be good news for rival Snapchat.
Shares of Snapchat’s parent company surged nearly 10% on Monday and another 5% in early trading Tuesday following news that US senators are planning to introduce legislation that could make it easier to ban rival app TikTok.
Virginia Democratic Sen. Mark Warner is expected to unveil bipartisan legislation Tuesday afternoon that expands President Joe Biden’s authority to ban TikTok and other suspected information technology risks from the United States, a person familiar with the matter told CNN. The bill is expected to have nearly a dozen co-sponsors from both sides of the aisle.
The stock surge suggests some on Wall Street are taking the possibility of a TikTok ban more seriously, after years of chatter in the nation’s capital about cracking down on the short-form video app due to security concerns related to its Chinese parent company.
It also highlights how lawmakers’ efforts to address the perceived threat of TikTok could ultimately benefit large US tech platforms, including dominant companies that some in Washington also want to rein in for other reasons.
Angelo Zino, senior equity analyst CFRA Research, wrote in a note Monday that the “biggest beneficiaries of a TikTok ban” would be Snapchat, Facebook-parent Meta, and YouTube.
“TikTok’s emphasis on short-form videos has increased engagement/time spent by consumers and has upended the entire industry, creating a headwind for META/SNAP,” Zino wrote. “Given TikTok’s growing engagement/user growth, it has been taking an increasing portion of the digital ad dollars pie from other social media players.”
In recent years, TikTok’s popularity has led a number of major US apps to imitate some of its features, including the launch of Instagram’s Reels and YouTube’s Shorts.
Shares of YouTube’s parent company Alphabet were essentially flat on Tuesday. Meta, which is up 50% so far this year thanks to its commitment to “efficiency,” was up slightly in early trading Tuesday, likely because of a report claiming it’s planning more layoffs.
A TikTok ban, or the possibility of it, may just be one more positive for Meta’s stock this year.
– CNN’s Brian Fung contributed to this report.