President Donald Trump has agreed to give ByteDance of China 45 days to negotiate a sale of controversial mobile application TikTok to Microsoft Corp. Three people familiar with the matter passed on the information to the press a few hours ago.
American officials said, under its Chinese parent, TikTok poses a risk to US security because of the personal data it handles. Trump had said on 31 July he was planning to ban TikTok in the country after dismissing the idea of a sale to Microsoft.
However, a discussion between Trump and Microsoft CEO Satya Nadella followed, after which Washington-based company Redwood said in a statement on 2 August that it would continue negotiations to acquire TikTok from ByteDance. The company said further it aimed to reach a deal by 15 September.
Trump was under pressure
Trump has been under the pressure of some of his advisers and many Republicans, a source said. Banning TikTok would alienate many of its young users ahead of the US presidential election in November, they cautioned. They told the president the ban would likely trigger a wave of legal challenges. Several prominent Republican legislators released statements in the last two days urging Trump to back a sale of TikTok to Microsoft.
“A win-win in the making,” Republican Senator Lindsey Graham tweeted in response to Trump’s new stance on 2 August.
The Committee on Foreign Investment in the United States (CFIUS), a US government panel that has the right to block any agreement, will oversee the negotiations between ByteDance and Microsoft, said a source ahead of a likely White House announcement.
Meanwhile, Microsoft has cautioned that there is no certainty a deal will be reached. “Microsoft fully appreciates the importance of addressing the President’s concerns. It is committed to acquiring TikTok subject to a complete security review and providing proper economic benefits to the United States, including the United States Treasury,” Microsoft said in a statement.
ByteDance and the White House is, as of now, silent about the Microsoft talks. In a statement issued late on 2 August that did not mention TikTok, ByteDance said it faced “complex and unimaginable difficulties” in going global.
As relations between the US 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.
In the meantime, India banning 59 Chinese apps over concerns of security inspired Washington DC to replicate the move in the US. However, as said above, Trump’s advisers suggested this different move of changing the owner of TikTok.
‘Witch-hunt,’ cries China; windfall for MS if Trump admin succeeds
Communist Party of China-backed newspaper China Daily today called ByteDance the victim of a “witch-hunt”. It said the US government had not provided evidence to support its allegation that TikTok posed a threat to US national security.
Owner of professional social media network LinkedIn, Microsoft would become a major competitor to social media giants such as Facebook and Snap Inc if its bid for TikTok, which boasts of 100 million American users, succeeds.
Under the proposed deal, Microsoft said it would take over TikTok’s operations in the US, Canada, Australia and New Zealand. It said it would transfer all private data of TikTok’s American users to the US.
Microsoft is likely to invite other American investors to acquire minority stakes in TikTok, the company has said. The US accounts for about 70% of the outside capital ByteDance raised.
It is not clear how much Microsoft would pay to buy TikTok. Reuters reported last week that ByteDance’s valuation expectations for the app exceeded $50 billion. However, US pressure to divest the product could lower that price tag.
A prime concern of separating TikTok’s technology from ByteDance’s infrastructure and access will drive the negotiations. The idea is to address American concerns about the integrity of personal data. ByteDance owns a Chinese short video app called Douyin too. It is based on the very code that TikTok uses.
An idea under consideration is to give Microsoft and ByteDance a transition period to develop such technology for TikTok that is completely different from that of ByteDance, a source said.
Not the first time the US asked a company to divest its product
The US government has been examining app developers over the personal data they handle, especially if some of it involves American military or intelligence personnel. Ordering ByteDance to sell TikTok to an American company would not be the first time the White House has taken action over such concerns.
Earlier this year, Chinese gaming company Beijing Kunlun Tech Co Ltd had sold Grindr LLC, a popular gay dating app it bought in 2016, for $ 620 million after CFIUS ordered it to divest.
In 2018, CFIUS had forced China’s Ant Financial to scrap plans to buy MoneyGram International Inc over concerns about the safety of data that could identify US citizens.
ByteDance was estimated to be worth $ 140 billion earlier this year when one of its shareholders, Cheetah Mobile, had sold a small stake in a private deal. The start-up’s investors include Japan’s SoftBank Group Corp.