US greenlights TikTok-Oracle deal; fate now lies with China

Under the arrangement that has been waved through by President Donald Trump, ByteDance will create a new U.S.-headquartered company called TikTok Global that will be majority owned by U.S. investors.

Photo credit: Getty Images
Photo credit: Getty Images

President Donald Trump has given his blessing to the proposed tie-up between ByteDance's TikTok and American software giant Oracle, bringing the deal closer to reality.

Trump said he has agreed in principle to a deal that will see the creation of a new U.S.-headquartered company to be called TikTok Global that will end up being majority owned by U.S. investors.

Under the arrangement, ByteDance will retain an 80% stake in the new company with Oracle and retail giant Walmart predicted to own the remaining 20%, but when combined with the 40% stake that U.S. investors hold in ByteDance, TikTok Global will end up being 53% owned by U.S. companies, according to Bloomberg. Oracle and Walmart have tentatively agreed to take a 12.5% and 7.5% stake in the new entity. This will precede a financing round and a U.S. IPO that the new company will seek.

TikTok Global will likely be headquartered in Texas and will hire at least 25,000 people, Trump told reporters on Saturday. The president also said the new company would make a $5 billion contribution towards an education fund for American youth.

Oracle will become the company's "trusted technology provider" and will be responsible for processing all U.S. user data in its servers. It will also get access to monitor TikTok’s source code and algorithms, although ByteDance will continue to control TikTok's algorithm.

TikTok released a statement saying it was "pleased that the proposal by TikTok, Oracle and Walmart will resolve the security concerns of the U.S. administration and settle questions around TikTok's future in the U.S."

The app, which was due to be banned on app stores starting on Sunday, according to Trump's executive order, has been given one more week to hammer out final details of the deal by the Commerce Department. It has 100 million users in the U.S.

It is now in the hands of the Chinese government to give the final approval on the deal. Beijing introduced regulations in late August on the export of artificial intelligence technologies such as voice and text recognition, and those that analyse data to make personalized content recommendations, among other technologies. Under the restrictions, ByteDance is required to seek permission from the Ministry of Commerce before transferring its technology overseas.

The Chinese restrictions prevented ByteDance from agreeing to Microsoft's proposed takeover bid, which would have given the software company control over TikTok's source code and algorithm. 

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