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ByteDance Buys Trump’s Time to Avoid TikTok Shutdown

President of the Free Nation Donald Trump has, in a Saturday press briefing, supported a deal in principle that would allow Chinese app-TikTok to continue its operations in the United States.

On Friday, President Trump had issued an Executive Order that TikTok China’s ByteDance businesses and WE Chat be terminated and it’s app downloads halted by today, Sunday midnight.

Tiktok

An illustration of the social media application logo, Tik Tok is displayed on the screen of an iPhone on March 05, 2019 in Paris, France (Photo by Chesnot/Getty Images)

Before this latest happening, U.S. Commerce Department had said they would block new downloads and updates to the TikTok and We Chat apps come Sunday.

U.S. officials had expressed concern that the personal data of as many as 100 million Americans that use the app were being passed on to China’s Communist Party government.

Trump signed an executive order on Aug. 14 giving ByteDance 90 days to sell TikTok. The deal announced on Saturday, however, is structured as a partnership rather than a divestment.

TikTok will be owned by a new company called TikTok Global and will be headquartered in the United States, possibly in Texas, Trump said.

Oracle Corp will take a 12.5% stake in TikTok Global and store all its U.S. user data on its cloud to comply with U.S. national security requirements, the companies said.

Retail giant Walmart said it would take a 7.5% stake in TikTok Global. The implied valuation for TikTok Global as a result of these investments could not be learned.

While Oracle and Walmart said that TikTok Global will be majority-owned by U.S. investors, this is the case only if one takes into account ByteDance’s investor base, according to a source familiar with the matter who requested anonymity to discuss the deal’s structure. This is because ByteDance will own 80% of TikTok Global, the source said.

Given that U.S. investors currently own about 40% of ByteDance, the White House will count that towards how much of TikTok Global is owned by U.S. parties, the source added. As a result, Oracle, Walmart, and ByteDance’s U.S. investors will own, directly or indirectly, about 53% of TikTok Global, a second source said.

Beijing-based ByteDance did not immediately respond to a request for comment. Walmart and Oracle also did not offer more information on TikTok Global’s ownership structure.

It was not immediately clear what spurred the White House to compromise on its push for an outright sale of TikTok.

However, the deal comes with pledges that cater to Trump’s ‘America First’ policy agenda. It also averts alienating TikTok’s young users ahead of the Nov. 3 U.S. election.

ByteDance agreed to create 25,000 new U.S. jobs at TikTok, up from a little over 1,000 now. Trump, who had previously called on companies such as Oracle and Walmart to pay the United States a “fee” to participate in the TikTok deal, said there would also be a $5 billion U.S. education fund as part of the deal.

“I said, you know, do me a favor, could you put up $5 billion into a fund for education so we can educate people as to the real history of our country, not the fake history,” Trump told a rally of supporters in Fayetteville, North Carolina on Saturday.

Oracle and Walmart described the agreement differently. They said that together with ByteDance top investors General Atlantic, Sequoia and Coatue they would create an educational initiative to deliver an artificial-intelligence driven online video curriculum for children, from basic reading and math to science, history and computer engineering.

The companies did not say how much they would spend on the education initiative. However, they said TikTok Global would pay more than $5 billion in new taxes to the U.S. Treasury.

“ We are a 100% confident in our ability to deliver a highly secure environment to TikTok and ensure data privacy to TikTok’s American users, and users throughout the world, ”Oracle CEO Safra Catz said.

Catz served on Trump’s transition team in 2016, while Oracle’s co-founder and chairman Larry Ellison is one of the few top technology executives to openly support the U.S. president.

Reuters reported on Thursday that TikTok Global would have a majority of American directors, a U.S. chief executive and a security expert on the board. Walmart said on Saturday its CEO Doug McMillon would serve as one of the five board members of TikTok Global.

According to a Reuters report on Thursday, ByteDance was planning an initial public offering (IPO) of TikTok Global. The filing of the IPO would be on a U.S. stock exchange and could come in about a year.

The Commerce Department said on Saturday it would delay by one week an order that had been set to take effect late Sunday that would have forced Alphabet Inc’s Google and Apple Inc to stop offering TikTok for download, so the TikTok deal can be completed.

The Committee on Foreign Investment in the United States (CFIUS), the U.S. government panel overseeing the deal talks, has to approve the transaction.

An order to require app stores to stop downloads of Tencent Holding Ltd’s WeChat is still set to take effect Sunday night.

TikTok interim chief executive Vanessa Pappa said in a video posted on Saturday that Tiktok is here to stay.

China also has approved the deal. The first Chinese reaction to the deal came from Global Times, which is published by the People’s Daily, the official newspaper of China’s ruling Communist Party.

Global Times editor Hu Xijin said “this scheme is still unfair, but it avoids the worst result that TikTok is shut down or sold to a U.S. company completely.”

 

Additional reporting by Reuters. 


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