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TikTok’s Chinese owner offers to forgo stake after Trump threatens to ban app

TikTok’s Chinese owner offers to forgo stake after Trump threatens to ban app

By Echo Wang and Alexandra Alper NEW YORK/WASHINGTON, Aug 1 (Reuters) – China’s ByteDance hasagreed to divest the U.S. operations of TikTok completely in abid to save a deal with the White House, after President DonaldTrump said on Friday he had decided to ban the popularshort-video app, two people familiar with the matter said onSaturday.…

By Echo Wang and Alexandra Alper

NEW YORK/WASHINGTON, Aug 1 (Reuters) – China’s ByteDance hasagreed to divest the U.S. operations of TikTok completely in abid to save a deal with the White House, after President DonaldTrump said on Friday he had decided to ban the popularshort-video app, two people familiar with the matter said onSaturday.

U.S. officials have said TikTok under its Chinese parentposes a national risk because of the personal data it handles.ByteDance’s concession will test whether Trump’s threat to banTikTok is a negotiating tactic or whether he is intent oncracking down on a social media app that has up to 80 milliondaily active users in the United States.

Trump told reporters onboard Air Force One late on Fridaythat he would issue an order for TikTok to be banned in theUnited States as early as Saturday. “Not the deal that you havebeen hearing about, that they are going to buy and sell… Weare not an M&A (mergers and acquisitions) country,” Trump said.

ByteDance was previously seeking to keep a minority stake inthe U.S. business of TikTok, which the White House had rejected.Under the new proposed deal, ByteDance would exit completely andMicrosoft Corp would take over TikTok in the UnitedStates, the sources said.

Some ByteDance investors that are based in the United Statesmay be given the opportunity to take minority stakes in thebusiness, the sources added. About 70% of ByteDance’s outsideinvestors come from the United States.

The White House declined to comment on whether Trump wouldaccept ByteDance’s concession. ByteDance in Beijing did notrespond to a request for comment

Under ByteDance’s new proposal, Microsoft will be in chargeof protecting all U.S. user data, the sources said. The planallows for another U.S. company other than Microsoft to takeover TikTok in the United States, the sources added.

Microsoft did not respond to a request for comment.

As relations between the United States and China deteriorateover trade, Hong Kong’s autonomy, cyber security and the spreadof the novel coronavirus, TikTok has emerged as a flashpoint inthe dispute between the world’s two largest economies.

ByteDance has been considering a range of options for TikTokamid U.S. pressure to relinquish control of the app, whichallows users to create short videos with special effects and hasbecome wildly popular with U.S. teenagers.

ByteDance had received a proposal from some of itsinvestors, including Sequoia and General Atlantic, to transfermajority ownership of TikTok to them, Reuters reported onWednesday. The proposal valued TikTok at about $50 billion, butsome ByteDance executives believe the app is worth more thanthat.

ByteDance acquired Shanghai-based video app Musical.ly in a$1 billion deal in 2017 and relaunched it as TikTok thefollowing year. ByteDance did not seek approval for theacquisition from the Committee on Foreign Investment in theUnited States (CFIUS), which reviews deals for potentialnational security risks. Reuters reported last year that CFIUShad opened an investigation into TikTok.

 

APP SCRUTINY

The United States has been increasingly scrutinizing appdevelopers over the personal data they handle, especially ifsome of it involves U.S. military or intelligence personnel.Ordering the divestment of TikTok would not be the first timethe White House has taken action over such concerns.

Earlier this year, Chinese gaming company Beijing KunlunTech Co Ltd sold Grindr LLC, a popular gay datingapp it bought in 2016, for $620 million after being ordered byCFIUS to divest.

In 2018, CFIUS forced China’s Ant Financial to scrap plansto buy MoneyGram International Inc over concerns aboutthe safety of data that could identify U.S. citizens.

ByteDance was valued at as much as $140 billion earlier thisyear when one of its shareholders, Cheetah Mobile, solda small stake in a private deal, Reuters has reported. Thestartup’s investors include Japan’s SoftBank Group Corp.

The bulk of ByteDance’s revenue comes from advertising onapps under its Chinese operations including Douyin – a Chineseversion of TikTok – and news aggregator app Jinri Toutiao, aswell as video-streaming app Xigua and Pipixia, an app for jokesand humorous videos.(Reporting by Echo Wang in New York and Alexandra Alper inWashington, D.C.Editing by Diane Craft)

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