Did TikTok sell its US operations? A gray area deal between politics and business.

 

the Chinese app TikTok

Did TikTok sell its US operations? A gray area deal between politics and business.

After months of controversy and political pressure, TikTok has reached an agreement that will redefine its presence in the United States.
Instead of a full sale as initially anticipated, the deal takes the form of a joint venture. This gives a new group of American and international investors a significant role in security-sensitive aspects of the app, while parent company ByteDance retains effective control of the profitable business.

According to a report by Business Insider, under the agreement, Oracle, led by Larry Ellison, will join an investment fund and a private equity firm as managing investors in the new entity that will oversee TikTok's US operations. However, these investors' influence will not extend to the core of the business, according to an internal memo sent by TikTok CEO Xu Chiu to employees.

The memo indicates that the US joint venture will be built on the foundation of TikTok's US Data Security unit, operating as an independent entity with authority over protecting US data, ensuring algorithm security, overseeing content, and guaranteeing software integrity. Meanwhile, TikTok Global, owned by ByteDance, will continue to manage its core business activities, primarily e-commerce, advertising, and marketing.

The sale of TikTok America: China partners with a handful of international investors
In other words, new investors will not be in the driver's seat when it comes to core revenue streams like TikTok Shop or advertising sales, even if they share in the profits. ByteDance will remain the key player in guiding the business growth strategy both within and outside the US market. Xu Qiu emphasized in his memo that advertisers will continue to reach global audiences "without any impact" on their operations.

Low deal valuation

This apparent separation between national security and business may explain the relatively low valuation of the deal. In September, the White House estimated the deal's value at only about $14 billion, a far cry from previous estimates of as much as $50 billion. The deal's focus on regulatory and security aspects, rather than the transfer of commercial control, appears to have played a key role in the lower valuation.

In terms of ownership structure, Oracle, Silver Lake, and MGX will collectively hold a 45% stake in the US joint venture. Approximately 30% will go to entities related to existing ByteDance investors, while undisclosed new investors will acquire 5%. ByteDance itself will retain a stake of slightly less than 20% in the US entity but will continue to fully oversee TikTok's operations in the rest of the world.
For TikTok, this arrangement appears to be a significant victory after two years of conflict with the US Congress, which passed a law requiring the company to sell its US operations or face a potential ban. The deal provides the platform with political and legal breathing room without abandoning the core of its business model.

But within the company, questions remain. Employees are wondering about the future leadership and management structure after the deal, expected to close in late January. One TikTok employee summed up the situation: “Even with a deal in place, we still don’t know what it means in practical terms for us,” adding that he doesn’t anticipate major changes in the near future.
Thus, TikTok appears to have “sold” its American business only nominally, in a deal designed more to calm political concerns than to genuinely redistribute economic power.