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A group of US tech investors has launched an ambitious plan to buy TikTok from its Chinese owner, as the popular short video app tries to escape the White House ban.
Investors, led by venture capital firms General Atlantic and Sequoia Capital, are in talks with the U.S. Treasury and other regulators to see if distributing TikTok and protecting it from its Chinese parent would satisfy U.S. concerns. About the application, according to two people involved in the process.
Last weekend, President Donald Trump’s election campaign placed ads on Facebook suggesting that TikTok was “spying” on US users, a claim the company has denied. Other critics have noted the app’s huge influence, as it is found on the mobile phones of tens of millions of Americans.
After the purchase, ByteDance, the Beijing-based company that currently owns TikTok, as well as its mainland Chinese sister app Douyin, would retain a minority stake in the international business, with non-voting shares, according to one of the people involved.
“This is the only viable plan,” said the person. The information first informed some of the details of the purchase negotiations.
Other investors, including New York-based private equity firms and Silicon Valley tech firms, have also reached out to ByteDance and its founder, Zhang Yiming, about a possible deal for TikTok.
But none is as advanced as the General Atlantic and Sequoia group, according to the people involved. ByteDance was reluctant to share its technology with a rival company, added one of the investors.
There were several obstacles before a separation could take place, said an adviser familiar with the TikTok situation. The White House is currently reviewing whether to take action against TikTok, including whether to include it on a list of prohibited entities that would harm its business. There were staunch factions in the state department and in the justice department that want it banned, the aide said.
Warning shots
Larry Kudlow, Donald Trump’s top economic adviser, said last week that “decisions” had not been made, but suggested that TikTok could “withdraw” from the Chinese holding company and “operate as an independent US company.”
Additionally, the acquisition of Musical.ly by ByteDance in 2017, which had an office in California and was possibly the catalyst for TikTok’s success, is being reviewed by the United States Foreign Investment Committee (Cfius).
One of the people involved in the potential offering acknowledged that Cfius was an increasing risk to the company. “Originally, when we sat down with them, there was a lot of talk about restrictions,” said the investor. “But after India closed TikTok, the discussion completely metastasized.” Discussions with Cfius started a few weeks ago in what is expected to be a 90-day process.
The United States Treasury, which chairs Cfius, declined to comment on the possible deal and on Cfius’ investigation, noting that “by law, Cfius cannot release information to the public.”
It was unclear what price investors would bid for TikTok. ByteDance was valued at $ 75 billion at its last fundraiser in 2018, but while TikTok has quickly accumulated hundreds of millions of users in India and the West, it’s not believed to be profitable. Most of ByteDance’s earnings come from Douyin. “He is young and at the beginning of the monetization process,” said one of the investors. “But it is a unique asset.”
TikTok said: “Since we publicly announced two weeks ago that we are evaluating changes in the corporate structure of TikTok’s business, there have been numerous suggestions made by outsiders who are not involved in the company’s internal discussions. We do not comment on rumors or speculation. We are very confident in the long-term success of TikTok and will make our plans public when we have something to announce. ”
General Atlantic and Sequoia declined to comment.
Additional reports by James Politi in Washington
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