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Donald Trump gave his blessing to Oracle Corp.’s offer for TikTok’s U.S. operations, putting the popular video-sharing app on track to escape a U.S.-imposed ban as part of his lobbying campaign against China.
“I approved the deal on concept,” Trump told reporters Saturday as he left the White House for a campaign rally in Fayetteville, North Carolina. “If they can, it’s great. If they don’t, that’s fine too. “
The new company, to be called TikTok Global, agreed to funnel $ 5 billion in new tax dollars to the U.S. and establish a new education fund, which Trump said would satisfy his demand that the government receive payment from the agreement. “They are going to establish a very large fund,” he said. “That is the contribution I have been asking for.”
Oracle plans to take a 12.5% stake in the new TikTok Global, while Walmart Inc. said it tentatively agreed to buy 7.5% of the entity. Walmart CEO Doug McMillon will serve on the board of directors for TikTok Global, the retailer said in a statement. Four of the five board seats will be filled by Americans, according to the statement.
The deal was forced by a pair of bans Trump issued in August over concerns that TikTok’s Chinese owner ByteDance Ltd. posed a national security risk, putting the video-sharing app at the center of the president’s confrontation. with Beijing.
Shortly after Trump signaled approval, the Commerce Department delayed a ban on Saturday for a week that would have forced Apple Inc. and Alphabet Inc.’s Google to remove the video app TikTok from their US app stores. On Sunday.
Trump is increasing pressure on Chinese-owned apps in the weeks leading up to the Nov. 3 presidential election, citing national security concerns about the data U.S. citizens provide them and the possibility that Beijing is using it to spy on it. The president is behind his opponent Joe Biden in the polls and has tried to come across as tougher on Beijing than the Democrat.
TikTok said in a statement that it was “pleased that the proposal by TikTok, Oracle and Walmart will resolve the security concerns of the US administration and resolve questions about the future of TikTok in the US.”
The company confirmed that Oracle will host all of its US data and protect its computer systems. Oracle’s Generation 2 Cloud fully isolates running applications and responds to security threats autonomously, according to the statement, eliminating the risk of foreign governments spying on US users or trying to influence them with disinformation.
“Oracle will rapidly deploy, scale and operate TikTok systems on Oracle Cloud,” Oracle CEO Safra Catz said in a statement. “We are 100% confident in our ability to provide a highly secure environment for TikTok and ensure data privacy for US TikTok users.”
Oracle will have full access to review the TikTok source code and updates to make sure there are no back doors used by the company’s Chinese parent to collect data or to spy on the 100 million US users of the video sharing app, according to people familiar with the matter. .
TikTok Global, together with Oracle, SIG, General Atlantic, Sequoia, Walmart and Coatue will create an educational initiative to develop and deliver an AI-powered online video curriculum, according to the statement.
TikTok said it is working with Walmart on a trade partnership and said it will participate in a TikTok global funding round alongside Oracle before an initial public offering in which investors can acquire up to a 20% cumulative stake in the company.
TikTok Global will likely be based in Texas and will hire “at least” 25,000 people, Trump said. TikTok will need to hire thousands of content moderators, engineers, and marketing staff who were previously located in China and around the world. The company will also pay more than $ 5 billion in new tax dollars to the Treasury, according to the statement.
To sweeten the deal for Trump, TikTok promised to hire an additional 15,000 jobs, more than the 10,000 positions the company already pledged to fill earlier this year. It is unclear if there is a timeline to achieve that goal or guarantees that it will be met. Facebook Inc., the largest social media company in the United States, employed about 45,000 people in 2019, while Twitter Inc. employed just 4,900, according to data compiled by Bloomberg.
Proponents of the deal told the Trump administration that the new company would be controlled by US investors by counting the passive stakes of existing shareholders in TikTok’s Chinese parent, people familiar with the matter said. Although Bytedance will have an 80% stake in the new company, existing US investors have a 40% stake in ByteDance. That says until 53% owned by US companies and investors, though that doesn’t imply majority control or voter rights, the people said.
TikTok Global, which will be an independent company, will hold an initial public offering in less than 12 months and the shares will be listed on a US exchange, according to the statement. After going public, US ownership of TikTok Global will increase and continue to grow over time, he added.
While the Chinese government must now approve the transaction to move forward, earlier this week ByteDance was increasingly confident that the proposal would be approved by Chinese regulators, people familiar with the matter told Bloomberg.
The initial reaction from Chinese state media seemed positive. “Is scheme it is still unfair, but it prevents the worst outcome, TikTok being shut down or sold entirely to a US company, ”wrote Hu Xijin, the influential editor-in-chief of China’s state-owned Global Times.
Under the terms of the deal reached earlier in the week, ByteDance would retain the majority of TikTok’s assets and control the algorithm, while Oracle and other US investors would take minority stakes.
Trump appeared to contradict that on Saturday. “It will have nothing to do with China, it will be totally safe, that will be part of the deal,” he said. “All control is Walmart and Oracle, two big American companies.”
Trump spoke with Oracle Chairman Larry Ellison and Walmart’s McMillon on Friday, telling them that he still expected the U.S. government to receive a cash payment as part of the transaction, according to people familiar with the matter. They agreed to the educational donation as a way to meet Trump’s demand, one of the people said. ByteDance first heard about the $ 5 billion education fund from news reports, a company spokeswoman said.
The deal was finalized last weekend, as a result of high-level negotiations between ByteDance, Oracle, and top Trump administration officials after ByteDance turned down an offer from Microsoft Corp. and Walmart to buy the US TikTok service. Directly.
Beijing has signaled that it would green-light a deal as long as ByteDance does not have to transfer the artificial intelligence algorithms that power the TikTok service, Bloomberg reported.
The Treasury Department said the deal is subject to a guarantee agreement that requires approval from the Committee on Foreign Investment in the United States, or Cfius. The terms sheet that has been negotiated between Cfius and the companies will now have to be formalized in a document that details the mechanics to implement the terms of the agreement.
That document would likely include requirements related to the establishment of the new company, the agreements governing its relationship with ByteDance, whether an IPO is part of the deal, whether ByteDance will have to divest its entire IPO stake, and what would happen. yes for some The reason why the IPO does not occur, said Aimen Mir, attorney at Freshfields Bruckhaus Deringer LLP and former deputy undersecretary for investment security at the Treasury.
In a video posted on TikTok with the caption #WeAreTikTok and we are here to stay, TikTok Acting Director Vanessa Pappas thanked users for “staying with us,” she said. “We are here for the long term.” In the comments below, users said that they were happy that the ongoing drama surrounding the ban was gone. “This intermittent situation is getting on my nerves,” said @iamdavante, who has 4.1 million followers on the video app.
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