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TikTok’s Chinese owner ByteDance, and new investors Oracle and Walmart, all get something from the deal that US President Donald Trump approved in concept on Saturday. Specifically, ByteDance gets more than it deserves, and the Americans get more than they bargained for.
Trump decreed in August that TikTok’s Beijing-based parent must sell the US operations of its youth-friendly video app on national security grounds. Yet the result isn’t really a sale at all. Although Trump claims the app’s new ownership will have nothing to do with China, ByteDance will in fact retain 80 per cent of the new company, TikTok Global. Software firm Oracle and retail giant Walmart will take the other 20 per cent.
Also read: Oracle-TikTok deal wins Trump’s blessing; Deal at a glance
It’s the first time a presidential sale order on national security grounds wasn’t fully executed. True, if US venture capital firms 40 per cent directly held stakes in ByteDance itself are taken into account, TikTok Global will in theory be more than 50 per cent American. But that’s not the same as control. TikTok will still be run on ByteDance technology, so worries about Chinese government access to data have not been convincingly addressed.
As for Oracle and Walmart, they get a stake in a company that, at the $60-billion valuation reported by Bloomberg, looks high. It’s about 43 times potential TikTok revenue this year, compared to rival Snaps enterprise value of 17 times sales value. They may be banking on getting other benefits that make TikTok more valuable under new ownership. Oracle will be TikToks cloud provider to store data, and Walmart will provide e-commerce and other services.
That comes at the cost of continued Washington scrutiny. Some Republican lawmakers like Senator Marco Rubio openly oppose the deal. Democratic presidential candidate Joe Biden says TikTok poses a genuine national concern that hell investigate if he wins in November. Even without the China links, TikTok like all social media companies faces risks from data breaches, child privacy concerns and users anxious over how their data is managed.
That’s unfamiliar territory for Oracle and Walmart. They have previously avoided the political scrutiny afforded to tech companies like Facebook and Alphabet. By branching out into social media and taking on China risk at the same time, they could be in line for double helpings of strife.
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