Tik Tok and its US integration – Lee Chandler

After the announcement of the quarantine, the country saw in increase in the use of stay at home apps such as online workouts apps, Netflix, Disney, zoom, Microsoft…, and a bigger surge in the use of social media platforms. Tik Tok, a Chinese owned company, which had been present in the US since August 2018 also saw an increase in usage just like other local social media platforms. 

In July 2020, president trump announced a ban of the widely known app Tik Tok for security reasons given that its parent company was the Chinese owned company ByteDance. In order to avoid the loss of such a big market (roughly a 100 million), Tik Tok agreed to partner up with the California based tech company Oracle and Walmart after passing up an offer from Microsoft. After working out the terms of the deal, the company filed and won a preliminary injunction to halt the impending ban of the download and use of its app in the US by claiming that the ban would encroach on the 1st Amendment right of US citizens.

Despite the attribution of the ban to security concerns, a theory was formed amongst fellow TikTokers stating that the ban was a retaliation for the Trump’s campaign debacle in June in Tulsa, OK. The reason behind this theory is that before the rally, President Trump and his government had barely mentioned the company and two weeks later, Secretary of State Mike Pompeo was the first in the Trump administration to introduce the idea of a ban of the app for security reasons.

Although President Trump gave his approval “in concept” for the deal, there is much confusion on the rate of ownership that each participant will hold. According to Oracle, upon its creation the newly built company Tik Tok Global will be an American owned company because most of the company shares will be owned by Americans however, according to ByteDance its parent company will still hold 80% of its shares. This issue gets even more complicated due to ByteDance’s announcement that it will still own Tik Tok source code while Oracle will take charge of its US affairs by hosting all US user data on its cloud platform and protecting the associated computer systems. 

According to the terms of the deal, Oracle will own 12.5% of the company while Walmart will own 7.5%. That coupled with the 40% shares of ByteDance that are owned by Americans, the deal is set to give the US 53% of the shares of Tik Tok Global. Additionally, the deal stipulates that most of the board of the newly formed company will be held by Americans, however ByteDance’s CEO and founder Zhang Yiming, who also holds private shares will have a seat on the board, giving ByteDance a stronger voice in the management of the company.

Passing this deal will undoubtedly have multiple advantages for the country besides the protection of its American users and the clearing of security concerns. Tik Tok Global is set create roughly 25000 jobs through the US expansion of its global headquarters and will also bring in about 5 billion dollars in taxes to the US treasury. Furthermore, as partner Walmart plans on creating an AI driven educational program for children, which will include courses in math, science, reading, history and computer engineering.

Given the current state of the economy, this deal, after a much-needed revision to clear away all confusion, will certainly prove itself beneficial for the country in more ways than one. 

References

Brown, A. (2020, August 1). Is This The Real Reason Why Trump Wants To Ban TikTok? Retrieved from Forbes.com: https://www.forbes.com/sites/abrambrown/2020/08/01/is-this-the-real-reason-why-trump-wants-to-ban-tiktok/#5b3b1b94aed4

Kovach, S. (2020, September 21). TikTok deal puts U.S. owners in charge, but Chinese parent company still has some say. Retrieved from CNBC.com: https://www.cnbc.com/2020/09/21/tiktok-deal-splits-control-between-us-and-chinese-owners.html

Wong, Q. (2020, September 28). TikTok-Oracle deal and a potential US ban: Everything you need to know. Retrieved from Cnet.com: https://www.cnet.com/news/tiktok-oracle-deal-and-a-potential-us-ban-everything-you-need-to-know/

 

Anah Ayassor
Acquisition & Asset Analyst

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