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New York investment firm Coatue Management, an early and substantial backer of ByteDance that has a seat on the TikTok parent’s board, is discussing selling part of its stake, according to three people with knowledge of the talks.

The firm has talked to brokers in the secondary market for private stocks to gauge the interest of potential buyers. It is considering selling hundreds of millions of dollars worth of shares, out of its multibillion-dollar stake, two of the people said. But Coatue only wants to sell if it can get a price that values ByteDance at between $230 billion and $240 billion, one of the people said.

That’s roughly where recent trades have valued the company, according to CapLight data, and it’s below the $268 billion valuation at which ByteDance offered to buy back some investor shares in December. But Coatue may not be able to get that price. A Shenzhen-based secondary market broker who has worked on some ByteDance share transactions in the past said potential buyers interested in ByteDance are now looking for a valuation of $210 billion to $220 billion.

The discussions reflect how even ByteDance’s biggest backers are trying to wring some cash out of their investments as the company’s path to going public remains elusive. Coatue is hoping to return some cash to its limited partners via the transaction, one of the people said.

ByteDance was once the most valuable private tech startup in the world, with a valuation that topped $400 billion in the secondary market in early 2021. But that valuation has fallen sharply since then, despite the company’s robust financial performance.

Last year, ByteDance’s revenue grew 40% to $120 billion and net profit more than doubled to $31.2 billion from 2022, according to a person with direct knowledge of the matter. The revenue growth is partly coming from overseas markets, primarily TikTok, while ByteDance's Chinese operations are still growing but at a slower pace. The Chinese businesses, such as Douyin, are the main profit contributor.

But a regulatory reset in China since 2021 has made it much tougher for large internet companies to go public in overseas markets such as the U.S. and Hong Kong. Meanwhile, increasing tensions between Beijing and Washington have repeatedly posed existential threats to TikTok in the U.S. TikTok is fighting a new law that demands the short-video app shed its Chinese parent or face a ban in the U.S. by early next year.

As the path for exit remains hazy, some of ByteDance’s early investors like GGV have sought to offload some or all of their investments via secondary share sales in the past two years. Coatue would be the highest-profile investor to do so. (GGV is now called Notable Capital in the U.S. and Granite Asia in Asia following the firm's breakup earlier this year).

Coatue founder Philippe Laffont made his firm’s first investment in ByteDance in 2017, when it was valued in the low tens of billions of dollars. The firm made follow-on investments in the company in the years that followed, according to two people with knowledge of those deals.

Laffont was then part of a growing cadre of Western investors betting that the next global internet titans would come from China. Other prominent investors that bought into the story and now also sit on ByteDance’s board include Arthur Dantchik of quantitative trading firm Susquehanna International Group, William Ford of General Atlantic, and Neil Shen of HongShan, formerly Sequoia Capital China.

Laffont, when asked about the looming ban threat over TikTok in the U.S. at an event hosted by The Information in April, said: “This is a situation right now for the U.S. and China to give clarity versus for us to decide what to do.” At the same event, General Atlantic’s Anton Levy said his firm hadn’t sold any of its ByteDance shares.

It remains unclear whether selling part of its stake will affect Coatue’s board seat at the company. At the same event in April, Laffont quipped, “I never thought that the board of ByteDance would be a full-time job.”

ByteDance has sought to appease investors who are anxious to cash in. The company offered its first $3 billion share buyback program for investors in 2022, and a bigger $5 billion buyback in December last year, in addition to employee share buybacks. But those buybacks were far from enough to enable major investors to sell significant portions of their stakes.

Further complicating the matter, Coatue may not be able to sell the shares to just any buyer who agrees on a price. ByteDance would need to approve the buyer, as is common among big private tech companies.

In the U.S., secondary sales in private startups have become more common during the two years since tech stocks crashed, largely shuttering investor appetite for public offerings. The sales allow venture capital firms to return cash to their limited partners. Some investors have added to their stakes by buying at the beaten-down prices. An increasing number of large startups, including Stripe, Revolut and Figma, have arranged such sales for their shareholders.

One reason for investors to hang onto ByteDance shares or for possible new ones to buy shares from the secondary market is the potential upside from an eventual initial public offering. With an annual revenue of $120 billion, ByteDance is closing in on Meta Platforms, which recorded $134 billion in sales last year. Applying the same nine times market cap–to-revenue ratio at which Meta stocks are traded now would peg ByteDance at worth just over $1 trillion.