ByteDance investors are in talks to use their stakes in the Chinese technology firm to help finance their bid for its popular short-video app TikTok, according to people familiar with the matter.
ByteDance has been in talks to divest TikTok’s North America, Australia and New Zealand operations to potential acquirers, including Microsoft and Oracle. President Donald Trump has ordered the Chinese company to sever ties with the social media app in the United States, citing concerns over the safety of the personal data it handles.
Some ByteDance investors, including investment firm General Atlantic, are vying to own large stakes in the TikTok assets for sale, the sources said. Under their restructuring plan, Microsoft or Oracle could receive a minority stake in the assets, the sources added.
The TikTok assets for sale could be worth between $25 billion (roughly Rs. 186,837 crores) and $30 billion (roughly Rs. 224,182 crores), the sources said. To help fund their bid, the ByteDance investors are discussing exchanging some or all of their stakes in the Chinese company with equity in the TikTok assets, according to the sources.
The ByteDance investors’ plan faces long odds and significant hurdles, the sources said.
Trump administration officials have said they expect a major US company to lead the TikTok deal and ringfence the app technologically from ByteDance. A US government panel, the Committee on Foreign Investment in the United States (CFIUS), has to sign off on any deal that ByteDance reaches.
Nevertheless, the push by some ByteDance investors for a bigger role in the TikTok deal underscores their efforts to give the Chinese company more options and avert a fire sale. Some of them had to convince ByteDance’s founder and CEO Yiming Zhang to let go of TikTok, the sources said.
Microsoft remains the lead bidder for the TikTok assets because of its deep pockets and technical capacity to design new algorithms for TikTok that will be separate from ByteDance and its Chinese short video app Douyin, according to the sources.
Microsoft is working on a blueprint on how TikTok would be separated operationally from ByteDance after a deal is reached, which the Redmond, Washington-based company has said it hopes to ink by September 15, the sources added. CFIUS would then monitor the implementation of the deal under a lengthy transition period, according to the sources.
The sources requested anonymity because the matter is confidential. TikTok and General Atlantic declined to comment, while ByteDance, Microsoft and Oracle did not immediately respond to requests for comment.
As relations between the United States and China deteriorate over trade, Hong Kong’s autonomy, cybersecurity and the spread of the novel coronavirus, TikTok has emerged as a flashpoint in the dispute between the world’s two largest economies.
While TikTok is best known for its anodyne videos of people dancing and going viral among teenagers, US officials have expressed concerns that information on users could be passed on to China’s communist government.
Trump has said he would support an effort by Microsoft to buy TikTok’s American operations if the US government got a “substantial portion” of the proceeds, but has also said there are other credible buyers such as Oracle.
Crackdown on Chinese-owned apps
The White House has stepped up its efforts to purge what it deems “untrusted” Chinese apps from US digital networks. Beyond TikTok, Trump has also issued an order that would prohibit transactions with Tencent Holding’s messenger app WeChat.
ByteDance acquired Shanghai-based video app Musical.ly in a $1 billion (roughly Rs. 7463 crores) deal in 2017 and relaunched it as TikTok the following year. ByteDance did not seek approval for the acquisition from CFIUS, which reviews deals for potential national security risks. Reuters reported last year that CFIUS had opened an investigation into TikTok.
TikTok said last week it planned to file a lawsuit against an August 6 executive order by Trump prohibiting transactions with the app and ByteDance.
ByteDance was valued at as much as $140 billion (roughly Rs. 1044750 crores) earlier this year when one of its shareholders, Cheetah Mobile, sold a small stake in a private deal, Reuters has reported. The start-up’s investors include Japan’s SoftBank Group.
© Thomson Reuters 2020
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TikTok Sale: Algorithm Question Said to Complicate Deal
Sale talks for TikTok’s US operations have been complicated by the key question of whether the app’s core algorithms can be included as part of a deal, according to a report in The Wall Street Journal that cited unidentified people familiar with the matter.
Those algorithms decide what videos users see without first requiring them to follow other users or specify their preferences. The Journal report stated the algorithms were considered part of the deal negotiations up until Friday.
That’s when the Chinese government introduced export restrictions on artificial intelligence technology that appear to cover content-recommendation algorithms such as the one powering TikTok. The move followed President Donald Trump’s effort to force a sale of TikTok’s US operations by September 20.
Those export restrictions mean that TikTok’s Chinese owner, ByteDance, would have to obtain a license to export any restricted technologies to a foreign company. The question is whether its algorithms would need Chinese government approval for transfer, and if so, whether Beijing would sign off.
The Journal report said both the prospective buyers and the seller, ByteDance, are trying to figure that out. Prospective buyers for US TikTok assets include a Microsoft-Walmart team-up and, reportedly, Oracle.
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TikTok CEO Kevin Mayer Quits After Three Months, Just as Firm Challenges US Ban
TikTok CEO Kevin Mayer has left the Chinese-owned video app firm just three months since joining, and only days since the company sued the administration of US President Donald Trump over an executive order effectively banning it in the United States.
He will be replaced by US General Manager Vanessa Pappas on an interim basis, TikTok said in a statement.
The resignation comes at a tricky time for super-fast growing TikTok as it tries to persuade both the United States and India that it is not a security threat, while at the same time holding discussions with prospective buyers following a second US order demanding the sale of its US operations.
In another development, former TikTok India manager Raj Mishra has been appointed by Triller as Country Manager and Head of Operations for the country. Mishra was the very first employee to be hired at TikTok India. In his new role at Triller, he will be leading and furthering the development of video-sharing app’s products, operations, and overall business goals.
“In recent weeks, as the political environment has sharply changed, I have done significant reflection on what the corporate structural changes will require, and what it means for the global role I signed up for,” Mayer said in an letter to employees.
“Against this backdrop, and as we expect to reach a resolution very soon, it is with a heavy heart that I wanted to let you all know that I have decided to leave the company.”
ByteDance founder and CEO Zhang Yiming said in a separate letter reviewed by Reuters that the company was “moving quickly to find resolutions to the issues that we face globally, particularly in the US and India”.
He said Mayer had joined just as the company was “entering arguably our most challenging moment.”
“It is never easy to come into a leadership position in a company moving as quickly as we are, and the circumstances following his arrival made it all the more complex,” Zhang said.
ByteDance employees told Reuters they were not surprised by Mayer’s decision given TikTok’s unpredictable future, and also because the ex-Disney executive has not had a significant role in some important decisions as he was still new to the team.
Zhang has been the key person in TikTok sale talks, said two people with knowledge of the matter. But Mayer represented TikTok to discuss with senior executives of interested buyers just days ago, a third person said.
TikTok’s decision to launch a $200 million (roughly Rs. 1,478 crores) “creator fund” in July was spearheaded by TikTok’s former head Alex Zhu, though Mayer was also directly involved, said two of the people. The project was initiated internally much earlier than Mayer’s arrival, one of the people said.
“The learning curve was steep for him, from daily operations to geopolitical implications,” said one of the people.
ByteDance did not immediately respond to Reuters’ request for comment.
“Whether TikTok reaches an agreement to sell its US business or decides to duke it out in the courts, the role for Mayer will not be anything like that he had envisioned when he joined,” said Mark Natkin, managing director of Marbridge Consulting in Beijing.
Mayer’s departure is not a great boost for company morale right now, Natkin said.
US India Challenges
Amid growing distrust between Washington and Beijing, Trump complained that TikTok was a national security threat and could share information about users with China’s government.
Trump issued an executive order banning US transactions with TikTok on August 6, effective in mid-September. He issued a separate order about a week later giving ByteDance 90 days to divest of TikTok’s US operations and data.
ByteDance has been in talks to sell TikTok’s North American, Australian and New Zealand operations which could be worth $25 billion (roughly Rs. 184,816 crores) to $30 billion (roughly Rs. 221,801 crores) to companies including Microsoft and Oracle, people with knowledge of the matter have said.
The company has also been targeted in India, where TikTok was one of 59 Chinese apps banned by the Indian government in June following a border clash between India and China.
That month, Mayer wrote to India’s government saying China’s government has never requested user data, nor would TikTok turn it over if asked.
TechCrunch reported earlier this month that ByteDance was in talks with India’s Reliance for investment in TikTok.
TikTok has become a global sensation since ByteDance launched the app in 2017, with operations in countries such as France, South Korea, Indonesia, Russia and Brazil. In April, the app hit 2 billion downloads globally.
© Thomson Reuters 2020
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Social Networking Sites Market 2020 (COVID-19 Worldwide Spread Analysis) by Key Players …
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Leading competitors in the Social Networking Sites market:
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1. North America Country (United States, Canada)
2. South America
3. Asia Country (China, Japan, India, Korea)
4. Europe Country (Germany, UK, France, Italy)
5. Other Country (Middle East, Africa, GCC)
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TOC Snapshot of Global Social Networking Sites Market
1. Social Networking Sites Product Definition
2. Worldwide Social Networking Sites Market Manufacturer Share and Market Overview
3. Manufacturer Social Networking Sites Business Introduction
4. Social Networking Sites Market Segmentation (Region Level)
5. World Social Networking Sites Market Segmentation (Product Type Level)
6. Social Networking Sites Market Segmentation (Industry Level)
7. Segmentation (Channel Level) of Social Networking Sites Market
8. Social Networking Sites Market Forecast 2020-2027
9. Product Type Social Networking Sites Segmentation
10. Segmentation of Social Networking Sites Industry
11. Cost of Social Networking Sites Production Analysis
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