US greenlights TikTok-Oracle deal; fate now lies with China

The US president has given his blessing to the proposed tie-up between ByteDance's TikTok and American software giant Oracle, bringing the deal closer to reality.

President Donald Trump said he has agreed in principle to a deal which will see the creation of a new US-headquartered company — to be called TikTok Global — that will end up being majority owned by US investors.

Under the arrangement, ByteDance will retain an 80% stake in the new company with Oracle and retail giant Walmart predicted to own the remaining 20%, but when combined with the 40% stake that US investors currently hold in ByteDance, TikTok Global will end up being 53% owned by US companies, according to Bloomberg. Oracle and Walmart have tentatively agreed to take a 12.5% and 7.5% stake in the new entity. This will precede a financing round and a US IPO that the new company will seek.

TikTok Global will likely be headquartered in Texas and will hire at least 25,000 people, Trump told reporters on Saturday (September 19). The president also said the new company would make a US $5 billion contribution towards an education fund for American youth.

Oracle will become the company's "trusted technology provider" and will be responsible for processing all US user data in its servers. It will also get access to monitor TikTok’s source code and algorithms, although ByteDance will continue to control TikTok's algorithm.

TikTok released a statement saying it was "pleased that the proposal by TikTok, Oracle, and Walmart will resolve the security concerns of the US Administration and settle questions around TikTok's future in the US".

The app, which was due to be banned on app stores from today (September 20) according to Trump's executive order, has been given one more week to hammer out final details of the deal by the US Commerce Department. It currently has 100 million users in the US.

It is now in the hands of the Chinese government to give the final approval on the deal. Beijing introduced new regulations in late August on the export of artificial intelligence technologies such as voice and text recognition, and those that analyse data to make personalised content recommendations, among other technologies. Under the restrictions, ByteDance is required to seek permission from the Ministry of Commerce before transferring its technology overseas.

The Chinese restrictions prevented ByteDance from agreeing to Microsoft's proposed takeover bid, which would have given the software company control over TikTok's source code and algorithm.

(This article first appeared on CampaignAsia.com)