While a decision was made weeks ago that ByteDance would sell its US operations of TikTok to Oracle and Walmart, the transition has been anything but smooth.
ByteDance is working closely with both buyers along with US regulators to resolve any security concerns that the US government might have with its planned sale of the US stake in the business. The approval will not be easy as President Trump believes that TikTok is a national security issue and has attempted multiple times to shut down any new download from the popular app.
The combination of Oracle and Walmart is the leading bidder for the company but all the nuances of the deal have yet to be worked out. The President wants the US companies that are purchasing the operation to have sole control of the data, which is not something that Bytedance and the Chinese government appear to be willing to give up. This has created share trading volatility for these companies.
Watch: Trump says TikTok Deal won’t be approved if ByteDance has any control
Mnuchin Says the Company Must Be a US Entity
Secretary of Treasury Steven Mnuchin said this week that TikTok must become a US-based company controlled by US investors or it will not be able to be used by US consumers. This puts ByteDance and the Chinese government at odds with the US government. Oracle and Walmart are stuck in the middle. While Mnuchin believes that the combination of Oracle and Walmart will be able to work out a deal, the issue presented by the US government makes this a challenge. The back-and-forth between the US government and the Chinese government has put ByteDance, Oracle, and Walmart in the middle. President Donald Trump will only approve a deal with TikTok if it is out of the hands of its Chinese parent ByteDance, but it was unclear if Beijing would approve the deal.
ByteDance Has a Final Proposal
According to reports, ByteDance is in discussions with the Committee on Foreign Investment in the U.S., the regulatory body that must clear any agreement. Several issues remain unresolved. This includes questions relating to data security and Chinese ownership of TikTok Global. There is also talk of a $5-billion educational fund. With so many details to iron out, the process is going very slowly. While the US Administration has consistently said that it plans to shut down TikTok downloads if a deal is not reached, it is unclear if they have the authority to do so.
A federal judge in late September overruled the Trump administration order that would have banned TikTok from U.S. smartphone app stores around midnight. The judge, Carl Nichols of the U.S District Court for the District of Columbia, did not agree to postpone the later ban in November which is a more comprehensive ban on the popular social media app. The Judge ordered that the company’s First Amendment rights would be violated and a ban would do irreparable harm to the business. Earlier this year, President Donald Trump declared that TikTok was a threat to national security.
The Bottom Line
The bottom line is that Oracle, Walmart, and ByteDance continue to work hard to come up with a deal that will allow a deal to go through. The US Administration is the biggest stumbling block as they will not let a deal go through without US ownership of the information the TikTok collects in the United States. That is clear based on Secretary Mnuchin’s comments. The question will be how much will ByteDance be willing to give up to let a deal go through?
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