HT TECH wants to start sending you push notifications. Click allow to subscribe

TikTok Considers Splitting From ByteDance If Deal With US Fails

TikTok’s leadership is discussing the possibility of separating from ByteDance Ltd., its Chinese parent company, to help address concerns about national security risks.

By: BLOOMBERG
Updated on: Mar 16 2023, 07:54 IST
TikTok is under scrutiny for its Chinese ownership, which US officials are concerned could lead to manipulation or spying by China on Americans — a fear TikTok is working to address. (AP)

TikTok’s leadership is discussing the possibility of separating from ByteDance Ltd., its Chinese parent company, to help address concerns about national security risks.

A divestiture, which could result in a sale or initial public offering, is considered a last resort, to be pursued only if the company’s existing proposal with national security officials doesn’t get approved, according to people familiar with the matter, who asked not to be identified discussing non-public information. Even then, the Chinese government would have to agree to such a transaction, the people said.

You may be interested in

Mobiles Tablets Laptops

TikTok’s US business could be valued at $40 billion to $50 billion based on social media multiples and other factors, according to Bloomberg Intelligence analysts Mandeep Singh and Damian Reimertz.

Also read: Looking for a smartphone? To check mobile finder click here.

TikTok is under scrutiny for its Chinese ownership, which US officials are concerned could lead to manipulation or spying by China on Americans — a fear TikTok is working to address. The company, which is undergoing a national security review by the Committee on Foreign Investment in the United States, agreed last year to implement a number of changes in a plan it calls Project Texas. The proposal includes bringing in American tech giant Oracle Corp. to host US user data and review its software, and appointing a three-person government-approved oversight board. Many of the moves are already under way.

But Cfius, which is a panel of multiple agencies involved in national security, has stalled in its review process, leaving TikTok unsure of whether its plans will be sufficient to continue operating in the US, the people said. Members of the committee from the Justice Department have been unwilling to accept TikTok’s proposal, according to other people familiar with the matter.

“Neither a ban of TikTok nor a divestiture of TikTok from ByteDance does anything to address national security concerns about data transfers,” said Brooke Oberwetter, a spokesperson for TikTok. “Under Project Texas, TikTok data for our US users would be held to a significantly higher security standard than any comparable American company.”

What Bloomberg Intelligence Says:

“Listing TikTok’s US business could fetch a $40-$50 billion valuation, using current social-media multiples and TikTok’s higher top-line growth vs. Meta, Snap and Pinterest, we calculate after Bloomberg News reported TikTok’s leadership was discussing possible separation from ByteDance. We don’t think a large tech firm might be interested in buying TikTok, but Microsoft’s focus on Bing and ChatGPT could drive interest in adding a video platform like TikTok to compete with Alphabet’s YouTube, especially if the Microsoft-Activision deal fails.”

— Mandeep Singh and Damian Reimertz, analysts

TikTok is also facing a barrage of potential legislation in Congress, some of which mandates a separation. Lawmakers, concerned that the app may be forced to share data with the Chinese government or could be used as an influence tool by China, have proposed multiple bills with bipartisan support that call for banning the video-sharing app or selling it.

TikTok Chief Executive Officer Shou Chew has been asked to testify before a House committee next week about the app’s data privacy and security practices, and the company’s relationship with the Chinese Communist Party.

The Canadian civil service, the European Commission and the US Congress have also banned staff from using the app because of concerns about how the company collects data. The UK is also weighing banning it from government devices, a person familiar with the matter said. Last month, four privacy regulators in Canada also launched an investigation into TikTok over its collection, use and disclosure of personal information.

ByteDance was valued at about $220 billion in a recent private-market investment by Abu Dhabi AI firm G42, Bloomberg News reported separately. That’s a significant discount to the $300 billion that TikTok’s owner set during a share buyback program last year.

G42, controlled by United Arab Emirates royal Sheikh Tahnoon bin Zayed Al Nahyan, acquired a $100 million-plus stake from existing investors in recent months through its 42XFund, people with knowledge of the deal said. Another fund bought into ByteDance at a $225 billion shortly after, one of the people said, asking not to be identified describing non-public information.

Catch all the Latest Tech News, Mobile News, Laptop News, Gaming news, Wearables News , How To News, also keep up with us on ,Twitter, Facebook, , and Instagram. For our latest videos, subscribe to our YouTube channel.

First Published Date: 16 Mar, 07:54 IST
Tags:
NEXT ARTICLE BEGINS