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Photographer: Hollie Adams / Bloomberg
Photographer: Hollie Adams / Bloomberg
ByteDance Ltd. is increasingly likely to miss a Trump administration deadline for the sale of its US TikTok operations. new Chinese regulations complicated negotiations with bidders Microsoft Corp. and Oracle Corp., according to people familiar with the matter.
ByteDance probably needs beyond the US executive order ban. September 20 to conclude an agreement with either party due to the regulatory review, the people said, asking not to be identified because the matter is private. In preliminary talks with Chinese officials, ByteDance was told that any proposal must be submitted for approval with detailed information on technical and financial issues, and the review will be substantial and take time, one of the people said. Officials have not been willing to give specific guidance on what kind of deal would work, the person said.
Microsoft and Oracle, who had submitted proposals before the Chinese regulations arrived, remain interested in buying the US branch of the successful video app and have not been deterred by Beijing’s involvement, the people said. Bidders have asked ByteDance to obtain the greatest possible clarity from Beijing on the new regulations, which ban the export of certain artificial intelligence technologies used by TikTok, they said.
The parties are still rushing to submit a preliminary agreement to the White House before this month’s deadline, although no agreement could be finalized before Beijing’s approval. It is also possible that ByteDance withdraws from a sale entirely if it determines that it cannot satisfy both governments, bidders and its own shareholders.
A company representative did not immediately offer comment.
ByteDance founder Zhang Yiming has been embroiled in a confrontation between the two major powers in the world. The serial entrepreneur has been reluctant to give up US TikTok from the start because he sees the company as a viable long-term competitor to Facebook Inc. and Google. He came under pressure to relinquish control when the Trump administration said it would ban the app and his own venture investors lobbied for a sale to salvage some value from the deal.
ByteDance Boss Rethinks TikTok Options After China’s New Rules
The Trump administration is divided on whether to give ByteDance more time or simply continue with the ban. Donald Trump himself has called the app a national security risk, passing an executive order to ban the service this month and passing a separate decision by the Foreign Investment Committee on the U.S, or CFIUS, to force a sale in mid-November.
Photographer: Gilles Sabrie / Bloomberg
ByteDance has sued in the United States to block the executive order’s ban, arguing that taking him out of service without proper notice and a fair opportunity to respond deprives him of his rights to due process in violation of the Constitution. The Beijing-based company has also denied that its app poses a security threat, saying US user data is not shared with China.
TikTok sues Trump for challenging US government restrictions.
In negotiations earlier this year, ByteDance had attempted to make a sale in the United States that would allow it to maintain a substantial interest in US operations, but the Trump administration has rejected that idea. Zhang would still like a small part of the operation, the people said. But Microsoft and its partner in the deal, Walmart Inc. wants full ownership of the business, one person said, while Oracle’s position is unclear.
Analysts and bankers have estimated that TikTok’s business in the United States is worth at least $ 20 billion, although the price would vary widely depending on what is included with the sale. Specific offerings from Microsoft, which is associated with Walmart Inc. and Oracle, which was supported by venture sponsors like Sequoia Capital, could not be determined.
China made its eleventh-hour entry into the TikTok process the last weekend in August, just as ByteDance had two offers in hand and was planning to review them in hopes of making a final decision before Sunday’s close, a different person said. . Beijing’s move surprised the company, this person said.
Without any debate or public announcement, China issued a notice of new restrictions on the export of artificial intelligence technologies, including speech recognition and techniques to personalize content. The aim of the rules is not necessarily to block the sale of US operations, but to ensure that Beijing is actively involved and slow the process, one person said. The review could well push the completion of any deal beyond the US election in November, the person said.
TikTok’s algorithms are not a huge hurdle for bidders, the second person said. Both Microsoft and Oracle have the technical ability to build their own algorithms and would collect data to fit them, the person said.
ByteDance’s regulatory team and deal negotiators have discussed whether it is still possible to engineer a sale that can gain approval from both governments, an acquirer, venture capitalists, and ByteDance itself.
TikTok owner value exceeds $ 100 billion in private markets
Zhang continues to operate from a position of strength. Private ByteDance is already worth $ 140 billion, according to startup tracker CB Insights, and is said to have generated more than $ 3 billion of net profit on more than $ 17 billion of revenue in 2019.
Investment bankers have started launching Zhang’s team to go public in China or Hong Kong, even amid growing scrutiny in the United States, and the demand for initial public offerings of tech companies in the market is increasing. . Zhang can make billions no matter what happens to Trump and US TikTok.
– With the assistance of Zheping Huang, Steven Yang, Dina Bass, Kurt Wagner, Saleha Mohsin, Naomi Nix and Vlad Savov
