TikTok Has a Huge Audience. Here's Who Would Win if It's Banned. -- Barrons.com

By Eric J. Savitz

The potential winners from a ban on TikTok in the U.S. market are clear, although the prospects for that happening remain uncertain at best.

The overwhelming passage by the House of Representatives on Wednesday of a measure intended to force TikTok's China-based parent company, ByteDance, to sell the popular short-video service or face a ban in the U.S. still faces a steep path to final approval. While President Joe Biden has said he would sign the proposal if it clears Congress, It's not at all clear that the measure will find support in the Senate, where Sen. Rand Paul (R., Ky.), for one, has objected to the measure on Constitutional grounds, asserting that the proposal could violate the First Amendment protection on free speech.

"I don't think Congress should be trying to take away the First Amendment rights of [170] million Americans," Paul said on Tuesday, according to the Washington Post.

The constitutional issues raised by the measure aren't trivial. A federal court late last year blocked a Montana law intended to bar TikTok in that state, asserting that the measure "likely violates the First Amendment," and an attempt by former President Donald Trump to ban TikTok using an executive order was blocked by a federal court.

The measure passed by the House would ban TikTok only if ByteDance fails to sell the service within five months of the bill becoming a law.

If proponents can get past those issues, a ban would almost certainly benefit other short-form video platforms, in particular Meta Platforms' Reels, which appears on both Facebook and Instagram, as well similar short-video services from Alphabet's YouTube and from Snap. There is real money at stake: TikTok reportedly raked in close to $20 billion in revenue in 2023.

Wedbush analyst Dan Ives writes in a research note Wednesday that he sees a 25% chance that TikTok is ultimately banned in the U.S., and expects the proposal to face "an uphill battle after today's House vote."

While Ives sees potential for "major impact" for Meta, Snap, and Alphabet, he also cautions that a ban could trigger backlash from Beijing that could hurt companies like Apple and Tesla that do considerable business in China.

Roth MKM analyst Rohit Kulkarni likewise writes in a research note written ahead of the House vote that passage of the measure would most obviously benefit shares of Meta, Snap, and, to a lesser extent, Alphabet. He also thinks streaming platforms like Netflix and Walt Disney's Disney+ could see benefits "as users find ways to spend those extra 75 minutes per day."

Another company with a stake in the TikTok situation is Oracle, which hosts TikTok's service in the U.S. market. Kulkarni asserts that depending on the outcome of the situation, the company could find new competition from that business from Amazon.com's Amazon Web Services or Microsoft Azure.

So far, at least, the markets are showing little impact from the House vote. Shares of Meta, the most obvious winner, are down 0.3%. Snap is up 3%, Alphabet is 1% higher, and Oracle is down 1% after a huge post-earnings run-up on Tuesday. Apple shares are down 1.2%.

Write to Eric J. Savitz at eric.savitz@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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March 13, 2024 11:11 ET (15:11 GMT)

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