ByteDance Plays it Safe, and Partners with Oracle
With the looming expiry of TikTok’s US operations sale, ByteDance found a smart way out without angering China nor the United States.
Last month, President Trump threatened to go ahead with the ban as early as September 20. Especially in the case should the Chinese technology firm fail to reach concession.
In return, the Chinese government responded with a revision in its export control rules. It said that it has a say over the deal, and the Beijing-based company should not be coerced by any party to sell its US operations.
For months on end, ByteDance-owned TikTok has frequented technology news after the Trump administration decided to put the app on the controversial “entity list.”
This holds the roster of Chinese apps banned in the United States.
In a brief context, the US government accused the app of feeding its 100 million American users’ information to the Communist Party of China, with which the technology firm has “reportedly” kept close contact with.
US Secretary Mike Pompeo asserted the danger that the action might pose to the country, calling it a national security threat.
As the ban threat grew, ByteDance CEO decided to put its TikTok US operations for sale. One of the first companies to inform their interest is Microsoft Corp.
The incumbent President is quick to give his approval to the bid, saying that Microsoft will be a significant frontrunner of the TikTok sale. However, he highlighted that the administration should get the pie’s best piece from the deal.
Other modern technology firms also joined the limbo. It seemed like almost every tech giants wanted to get a grip on popular app with over 800 million users, including Twitter and Oracle.
The most unexpected contender is the grocery giant Walmart.
Microsoft Out, Oracle In
On most occasions, the early comer rarely gets a competitive advantage over late joiners. Such is right with the TikTok deal.
Microsoft was the first to show interest. But behind Oracle’s run is ByteDance’s major investors, namely Sequoia and General Atlantic. Thus, making it a more attractive bidder.
As if to add an insult to injury, Microsoft reportedly offended CEO Zhang Yiming after referring to TikTok as a “security risk it could fix.”
This happened at a time when the Chinese company stood adamant with its claim that it did not make any party have access to its users’ information.
Due to this, ByteDance shifted gears and became more welcoming to Oracle—the “almost” winner, but not quite.
The TikTok frenzy did not reach an outright divestment, as many spectators anticipated. Currently, Oracle is on the road to take a sizeable minority in TikTok’s US business.
The remainder of the stake will remain under the care of its major stakeholders, including General Atlantic and Sequoia.
The firm’s key executives call the move a “restructuring” plan, while others consider it a joint venture. Nevertheless, it is still far from the market expectation of full ownership.
The Committee on Foreign Investments in the United States will decide the approval of TikTok US’ board of directors.
The deal comes at a quid-pro-quo compromise of 25,000 new jobs for the United States. That was a surge from current figures at only a thousand.
Get the latest economy news, trading news, and Forex news on Finance Brokerage. Check out our comprehensive trading education and list of best Forex brokers list here. Subscribe now and receive FREE updates on the market today!