TMTPost -- TikTok owner ByteDance Ltd. doesn’t make clear how to handle the popular short video platform if the U.S. government bans it unless it is sold, but rumors about various options swirled.
Credit：ByteDance
ByteDance would rather shut down TikTok in the United States than sell the app if the Chinese internet heavyweight exhausts all options to fight the legislation, Reuters cited sources on Thursday. It is very unlikely for ByteDance is very unlikely to sell TikTok as the algorithms the app relies on for its operations are considered core to ByteDance’s overall operation, according to sources close to the company. The sources suggested shutdown is a reasonable option for it would have limited impact on ByteDance’s business since TikTok makes up a small share of the parent’s revenues and daily active users.
Bytedance didn’t comment on the report yet. Prior to the report, a statement the Beijing-based company released on its media unit Toutiao said it had no plan to sell TikTok. The statement is deemed as a response to a report from The Information about its sales option.
ByteDance is internally exploring scenarios for selling a majority stake in TikTok’s U.S. business, and the corporate strategy team led by Zhao Pengyuan is invovled in the discussion, The Information reported, citing people with knowleged of the matter. Zhao, who reports to ByteDance CEO Liang Rubo, lead the team which works on industry and business research in request for management.
It was reported that one scenario Bytedance staff discussed is to sell more than 50% of TikTok U.S. while possibly retaining a 20% stake, the limit that the law puts on Chinese ownership. ByteDance hasn’t reached out to potential buyers of TikTok, with entire valuation of as much as US$100 billion theoretically. The sales options including the TikTok brand would exclude the algorithm that powers TikTok, though without it, TIkTok may have limited appeal to buyers, accordint to the report. ByteDance was also reported to prefer selling to a company that is not directly involved in the tech industry, which means two previous bidder in 2020--Oracle and Microsoft will have no chance to join in the possible sales deal.
“This is categorically untrue. Pengyuan’s team doesn’t have that responsibility and has not worked on any plans for the scenarios discussed,” a ByteDance spokesperson said following The Information report.
These reports came a day after the U.S. President Joe Biden signed a bill that could ban TikTok in the country. The legislation gives TikTok owner ByteDance up to a year to divest its U.S. assets including TikTok, otherwise the Chinese tech giant would face a ban on its app being available in U.S. app stores or on U.S. web hosting services. The requirement of the latest bill suggested the deadline of TikTok sales was extended by six months after a bill the House passed last month would have allowed.
TikTok stressed its pledge to fight the potential ban right after Biden’s signing. “This unconstitutional law is a TikTok ban, and we will challenge it in court,” the company wrote in a Wednesday statement. “We believe the facts and the law are clearly on our side, and we will ultimately prevail.”
There's speculation that if the Chinese government refuses to permit ByteDance to divest TikTok's algorithm, it could outright block the sale. Alternatively, it might consent to TikTok's sale but without transferring the valuable algorithm, which serves as the foundation of its popularity.
The push to force a TikTok sale has already generated speculation about potential buyers, including a group of investors brought together by a former Treasury Secretary, Steven Mnuchin; large American corporations; or a coalition of private equity firms, according to The New York Times.
The trouble lies in the fact that TikTok's parent company is beholden to Chinese law, and the Chinese government has openly opposed the sale. Over the past few years, China has enforced export controls that extend to algorithms, a policy that covers the highly effective algorithm driving TikTok's recommendation system.
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