The drama of the US government forcing ByteDance to sell TikTok's US business has taken a new turn.
The popular short video sharing platform's owner ByteDance is in talks with the US government about the possibility of delaying the deal and even wants to be allowed to change the structure of the sale, a TikTok USA insider told Sina Tech on Wednesday, adding that the turnaround is because of the Chinese government's intervention.
On August 28, China's Ministry of Commerce and Ministry of Science and Technology released a "Catalogue of China's Prohibited and Restricted Export Technologies," which includes the artificial intelligence algorithms involved in ByteDance's business, or "personalized information push service technology based on data analytics.
ByteDance then stated that it would strictly comply with the new regulations and handle business related to the export of the technology.
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According to the source, the negotiations between ByteDance and the US government changed after the Chinese government intervened.
That's because a sale of TikTok's US business excluding algorithms would clearly affect the competitiveness of TikTok's US business in the future.
This would not only affect the acquisition interest of potential buyers, but would also directly touch the investment interests of ByteDance's US investors. Current potential buyers of TikTok's US business include Microsoft and Walmart in a joint acquisition, Oracle, and Twitter.
"(Potential acquirers) don't wants to buy a short video platform with only users and no technology. They are not Facebook, and are unlikely to come up with alternative technology in the short term to continue to keep TikTok's US business competitive and to continue to retain users. If they can't retain users, sooner or later TikTok US users and market will be eaten up by Facebook. So they hope to find a solution," the Sina Tech source said.
TikTok says it has 100 million monthly active users in US and 2 billion global downloads
Because of antitrust reasons, it is impossible for Facebook and Google to buy TikTok's US business.
The source revealed that if they want ByteDance to sell the TikTok US business with algorithm technology, it would take more time to get permission from the Chinese government, which means that the sale cannot be completed in accordance with the US government's requirements.
This change brought about by the Chinese government gives ByteDance more legitimate reasons to push US institutional investors and potential acquirers to convince the US government.
In the alternative, if Beijing bans ByteDance from selling the algorithm technology behind TikTok, then two factions within the US government may have to deliberate: whether to carry out a presidential order and block TikTok's US business altogether, with no financial gain for anyone, or to just leave it at that and allow ByteDance to retain some rights and interests, with all parties benefiting from the sale.
The source told Sina Tech that it was not possible to know if there has been communication between governments on the matter, but that US investors did approach the US government recently.
While Facebook has been lobbying the US government to suppress TikTok's US growth, there are other US stakeholders who are pushing the White House to keep the valuation of TikTok's business as high as possible so they can reap maximum returns.
In addition to ByteDance's US institutional investors, the potential suitor, Oracle, has very close ties to the Trump administration.
There is also a clear divide between ByteDance's board of directors over the sale of TikTok US because of their different interest positions.
Several US institutional investors wanted a successful completion of the sale of TikTok US, where they could continue to retain their stake and continue to expand their investment returns in the future.
Therefore, they had been pressuring the ByteDance founders to accept the reality as soon as possible and choose a US strategic partner to sell their stake in TikTok US, as they did not want their own interests to be affected by the crackdown on TikTok's US business.
ByteDance's US institutional investors include several major fund giants: Sequoia Capital, General Atlantic and Coatue Management.
In an effort to force ByteDance to sell its US business, the White House issued an executive order on August 6 prohibiting US companies and individuals from doing business with ByteDance for 45 days, and on August 14 the White House issued another order requiring ByteDance to complete the sale of its US business within 90 days (mid-November) and to destroy all data related to US users under US government supervision.
