Tuesday, 27 October

Trump approves TikTok deal. But big questions remain

Business
Tik Tok app

Who controls TikTok? Is the social media platform safe? Has a US ban been averted for good?

President Donald Trump's attempts to force a quick sale of popular Chinese-owned video app TikTok produced a tentative deal over the weekend that would see Oracle (ORCL) and Walmart (WMT) take a minority stake in a new US company that will operate TikTok.  

The US Department of Commerce pushed back a threatened ban on US downloads of the app by one week, to the end of the day on September 27. But as the companies race to finalize the proposal, crucial questions over data security, national interest and the deal's structure remain unanswered.  

What is clear is that the fight over TikTok is bigger than who owns an app popular with Generation Z. It's also about the future of US-China relations, and the rough new terrain businesses are forced to navigate as tensions between the world's two biggest economies ramp up.

Deal confusion Trump has for weeks threatened to ban TikTok, which is owned by China's ByteDance, on national security grounds unless an American company takes control of its US operations.   TikTok has roughly 100 million users in the United States, and Trump claims the app gives Beijing access to the personal data of Americans.  

TikTok has denied those allegations. The company has said its data centers are located entirely outside of China and that none of that data is subject to Chinese law.  

Over the weekend, Trump gave his blessing to a deal that would give Oracle and Walmart a combined 20% stake in a new company called TikTok Global, which would be headquartered in the United States and operate the app. Four of the company's five board members would be Americans, Oracle and Walmart said in a joint statement.  

The fifth person is likely to be ByteDance and TikTok founder Zhang Yiming, according to a person familiar with the deal. ByteDance confirmed in a statement that TikTok Global's board "includes the founder of ByteDance ... as well as the CEO of Walmart."  

Speaking to reporters over the weekend, Trump said he approved the deal "in concept."  

"I have given the deal my blessing," Trump said. "If they get it done, that's great. If they don't, that's okay, too."  

But the deal stops well short of the full sale of TikTok that Trump originally wanted, and its structure contradicts his claim on Saturday that the app will be "totally controlled" by Walmart and Oracle.  

There also appears to be a great deal of confusion over TikTok's proposed ownership structure after the deal, with Oracle and ByteDance releasing contradictory statements on Monday.  

Oracle executive vice president Ken Glueck said ByteDance will not own any part of the viral video app. "Americans will be the majority and ByteDance will have no ownership in TikTok Global," said Glueck.  

The statement from Oracle appeared to muddy an already confusing situation after it and Walmart announced on Saturday they would be taking a 20% share of TikTok under the proposed deal.  

The initial announcement implied that ByteDance would continue to own the remaining 80% of TikTok going forward, raising questions about how that could resolve the Trump administration's national security concerns about TikTok's ownership by Chinese interests.  

In a statement Monday, ByteDance claimed that TikTok would be "a 100% owned subsidiary of Bytedance," but a person familiar with the deal said that was inaccurate.  

On Monday, Trump indicated that Walmart and Oracle would "own the controlling interest. ... And if we find that they don't have total control, then we're not going to approve the deal."  

According to the person familiar with the deal, TikTok Global will be partially owned by ByteDance's international and Chinese investors, but ByteDance itself will hold zero percent of the new company.  

Oracle and Walmart's investment will take US ownership of TikTok Global to 53%, with ByteDance's Chinese and international investors holding 36% and 11%, respectively.  

The person also said Oracle will be responsible for reviewing the app's source code and algorithm before passing it on to users. TikTok's data, including usernames and passwords, will be stored by Oracle within the United States.  

Oracle said it would host data pertaining to American users on its cloud platform. ByteDance said in a statement that Oracle would be able to review the app's source code, but the deal does not involve the transfer of its algorithms and technologies.  

Marco Rubio, a Republican senator, said there could still be a risk of US user data being sent to China.  

"If China continues to control the code, as I understand they would in this deal, they could put in that code an instruction to secretly send data back to China, to the mainland.  

No matter where the actual data is housed there can be something embedded in that code that sends it the other way," he said during an interview on Fox News.  

Source: CNN