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WASHINGTON / NEW YORK: US President Donald Trump said on Saturday that he supported a deal in principle that would allow TikTok to continue operating in the United States, even as it appeared to conflict with his previous order for China’s ByteDance to ditch. from the video app.
ByteDance was racing to prevent a crackdown on TikTok after the US Department of Commerce said on Friday it would block new downloads and updates to the app on Sunday. US officials had expressed concern that the personal data of up to 100 million Americans using the app would be passed on to the government of the Communist Party of China.
Trump signed an executive order on August 14 giving ByteDance 90 days to sell TikTok. However, the deal announced Saturday is structured as a partnership rather than a divestiture.
TikTok will be owned by a new company called TikTok Global and will be based in the United States, possibly in Texas, Trump said. Oracle Corp will take a 12.5% stake in TikTok Global and store all of its US user data in its cloud to comply with US national security requirements, the companies said. Retail giant Walmart said it would take a 7.5% stake in TikTok Global. The implicit valuation of TikTok Global as a result of these investments could not be known.
While Oracle and Walmart said that TikTok Global will be majority owned by US investors, this is the case only if ByteDance’s investor base is taken into account, according to a source familiar with the matter who requested anonymity to discuss the structure of the deal. . This is because ByteDance will own 80% of TikTok Global, the source said.
Given that US investors currently own about 40% of ByteDance, the White House will count that towards the amount of TikTok Global that is owned by US parties, the source added. As a result, US investors in Oracle, Walmart and ByteDance will own, directly or indirectly, approximately 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 about the ownership structure of TikTok Global.
It was not immediately clear what prompted the White House to commit to its push for a full TikTok sale. However, the deal comes with promises that fit Trump’s ‘America First’ political agenda. It also avoids alienating young TikTok users ahead of the November 3 US election.
ByteDance agreed to create 25,000 new US jobs on TikTok, up from just over 1,000 now. Trump, who had previously asked companies like Oracle and Walmart to pay the United States a “fee” to participate in the TikTok deal, said there would also be a $ 5 billion US education fund as part of the deal.
“I said, you know, do me a favor, could you put $ 5 billion into an education fund so we can educate people about the real history of our country, not the fake history,” Trump said at a rally from supporters in Fayetteville, North Carolina on Saturday.
Oracle and Walmart described the deal differently. They said that together with ByteDance’s top investors General Atlantic, Sequoia and Coatue, they would create an educational initiative to offer an AI-powered 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 that TikTok Global would pay more than $ 5 billion in new taxes to the US Treasury.
While ByteDance may keep the TikTok source code in the agreement, Oracle may inspect it. Oracle CEO Safra Catz said her company was “100% confident in our ability to provide a highly secure environment for TikTok and ensure data privacy to US TikTok users and users around the world.” .
Catz was part of Trump’s transition team in 2016, while Oracle co-founder and president Larry Ellison is one of the few top technology executives who openly supports the US president.
ByteDance also had to give up some of its control of TikTok. Reuters reported Thursday that TikTok Global would have a majority of US directors, a US CEO and a security expert on the board. Walmart said Saturday that its CEO, Doug McMillon, would be one of five members of the TikTok Global board.
ByteDance ownership of TikTok may shrink even further next year. Reuters was the first to report Thursday that ByteDance is planning an initial public offering (IPO) of TikTok Global. The presentation of the initial public offering would be made on a United States stock exchange and could arrive in about a year.
CFIUS APPROVAL
The Commerce Department said Saturday it would delay an order that had been scheduled to take effect Sunday night by a week and would have forced Alphabet Inc’s Google and Apple Inc to stop offering TikTok for download, so that it can be made available. complete the TikTok agreement. The Committee on Foreign Investment in the United States (CFIUS), the US government panel that oversees the deal negotiations, must approve the transaction.
Oracle outperformed Microsoft Corp, which said last week that ByteDance rejected its offer to acquire the US TikTok business.
The Trump administration has stepped up its efforts to remove Chinese apps it deems “untrustworthy” from US digital networks. An order requiring app stores to stop WeChat downloads from Tencent Holding Ltd will still go into effect Sunday night.
Acting TikTok CEO Vanessa Pappa said in a video posted Saturday that “Tiktok is here to stay.”
China also has to approve the deal. “We’ll see if it all happens or not,” Trump said.
The first Chinese reaction to the deal came from the Global Times, which is published by the People’s Daily, the official newspaper of the ruling Communist Party of China. Global Times editor Hu Xijin said that “this scheme remains unfair, but it avoids the worst outcome of TikTok being shut down or sold entirely to an American company.” – Reuters
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