It seems that the controversy regarding TikTok’s US operations is on its way to being resolved, as a ban of the app in the US has been delayed to September 27th.
TikTok revealed that Oracle and Walmart will “take part in a TikTok Global pre-IPO financing round,” netting them a cumulative stake of 20% in the Chinese company. A previous deal brought forward by Microsoft was rejected by TikTotk parent company ByteDance.
TikTok Global is a new company that will be launched to allow the popular Chinese video sharing app to continue operations in the US, with plans to launch an initial public offering (IPO) within the next 12 months. The Oracle/Walmart deal will result in a US-based headquarters for the new company, governing all global TikTok operations, while bringing 25,000 jobs across the country.
Oracle will gain 12.5% ownership, and be the “trusted cloud and technology provider responsible for fully securing [TikTok] users’ data,” the social media app said. Walmart will own 7.5%, and will be a commercial partner by entering “into commercial agreements to provide [their] e-commerce, fulfillment, payments and other omnichannel services to TikTok Global,” as per a company statement.
“I have given the deal my blessing,” US President Donald Trump said to reporters outside the White House on Saturday, 19th of September. “I approved the deal in concept.”
He also said the new company TikTok Global will “have nothing to do with any outside land, any outside country, it will have nothing to do with China. It’ll be totally secure. That’ll be part of the deal.”
As a result, the ban, which was scheduled to take place on Sunday, has now been delayed a week, to the 27th of September.
For now, it seems President Trump has loosened his demands. While previously he had requested a full sale of US operations, as per a Bloomberg report, it seems he is now satisfied with a 20% stake of the new US-based entity that is set to be formed, TikTok Global. This could be because of the recent pushback from China, which saw the company update its export laws governing certain Chinese technologies, of which the TikTok algorithm qualifies. This meant that if a purchase of the US of operations of TikTok would result in the sale of proprietary technology and algorithms developed and owned by the Chinese app, China could intervene and cut it short.
However, the current proposed deal won’t supposedly involved the sale of any such tech.
“The current plan does not involve the transfer of any algorithms and technologies,” ByteDance said in a statement translated by CNBC. “Oracle has the authority to check the source code of TikTok USA.”
“Source code forms the basis for applications and software. Allowing inspections of source code is common practice to address local data security concerns,” CNBC noted.
With tensions surrounding TikTok finally easing, the ball is now in China’s court, which will need to sign off on a deal of this kind. Given that no unique Chinese tech will supposedly be crossing borders, and given that the app would be allowed to continue operating in one of its largest markets especially after the ban in India, China has good reason to approve.