FILE PHOTO: Tik Tok logos are seen on smartphones in front of a displayed ByteDance logo in this illustration taken November 27, 2019.
NEW YORK: ByteDance abandoned the sale of TikTok in the United States on Sunday (Sep 13) in pursuit of a partnership with Oracle that it hopes will spare it a US ban while appeasing China’s government, people familiar with the matter told Reuters.
The Beijing-based company had been in talks to divest TikTok’s US business to either Oracle or a consortium led by Microsoft after US President Donald Trump ordered the sale last month and threatened to shut down the popular short-video app in the United States.
While TikTok is best known for its anodyne videos of people dancing that go viral among teenagers, US officials have expressed concerns that information on users could be passed on to China’s communist government.
The sale negotiations were upended by China’s updating of its export control rules late last month that gave it a say over the transfer of TikTok’s algorithm to a foreign buyer. Reuters reported last week that the Chinese government would rather shut TikTok down in the United States than let it be part of a forced sale.
Under the proposed deal, Oracle will be ByteDance’s technology partner and will assume management of TikTok’s US user data, the sources said. Oracle is also negotiating taking a stake in TikTok’s US assets, the sources added.
Some of ByteDance’s top backers, including investment firms General Atlantic and Sequoia, will also be given minority stakes in TikTok’s US operations under the proposed deal, one of the sources said.
It is unclear whether Trump, who wants a US technology company to own most of TikTok in the United States, will approve the proposed deal. The Committee on Foreign Investment in the United States (CFIUS), which reviews deals for potential national security risks, is overseeing the talks between ByteDance and Oracle.
ByteDance plans to argue that CFIUS’ approval two years ago of China Oceanwide Holdings Group’s purchase of US insurer Genworth Financial offers a precedent for the deal structure it is proposing with Oracle, the sources said.
In that deal, China Oceanwide agreed to use a US-based, third-party service provider to manage the data of Genworth’s US policy holders. ByteDance will argue a similar arrangement can safeguard the data of TikTok’s US users, the sources said.
ByteDance and Oracle did not immediately respond to requests for comment. The White House declined to comment.
Oracle’s chairman Larry Ellison is one of the technology world’s few supporters of Trump. The firm has significant technological prowess in handling data, but no experience in social media. Its clientele comprises companies, rather than consumers.
Microsoft said earlier on Sunday it was informed by ByteDance that it would not be selling it TikTok’s US operations.
Retail giant Walmart, which had joined Microsoft in its bid, said on Sunday it continued to have an interest in a TikTok investment, and that it would have further discussions with ByteDance’s leadership and other interested parties.
“We know that any approved deal must satisfy all regulatory and national security concerns,” Walmart said.
TRUMP’S ORDERS
Trump signed two executive orders last month targeting ByteDance. The first bans US companies from transacting with the Chinese company or its subsidiaries from Sep 20. The second requires ByteDance to sell TikTok by Nov 12 due to the US security concerns.
Were Trump to agree to ByteDance’s proposed deal structure with Oracle, he would have to make a U-turn and rescind his order calling specifically for TikTok to be divested.
As many as 40 per cent of Americans back Trump’s threat to ban TikTok if it is not sold to a US buyer, a Reuters/Ipsos national poll found last month. Among Republicans – Trump’s political party – 69 per cent said they supported the president’s order, even though only 32 per cent said they were familiar with the app.
TikTok has been at the centre of a diplomatic storm between Washington and Beijing. Trump claims that TikTok could be used by China to track the locations of federal employees, build dossiers on people for blackmail and conduct corporate espionage.
TikTok has filed a lawsuit challenging the crackdown by the US government, contending that Trump’s order was a misuse of the International Emergency Economic Powers Act because the platform is not “an unusual and extraordinary threat”.
Downloaded 175 million times in the US, TikTok is used by as many as a billion people worldwide to make quirky, short-form videos on their mobile phones. It has repeatedly denied sharing data with Beijing.
