TikTok’s US Future Secured: Oracle-Led Consortium Reaches Deal with ByteDance
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The long-running saga surrounding the future of TikTok’s US operations appears to be nearing its conclusion. The social media giant announced that its US subsidiary will be acquired by a consortium spearheaded by Oracle Corp., aligning with an agreement initially unveiled by the Trump administration in September. This sale is being undertaken to comply with the Protecting Americans from Apps Controlled by Foreign Adversaries Act, a national security law signed in 2024 by President Joe Biden, which mandates that ByteDance Ltd., TikTok’s Chinese parent company, reduce its ownership stake in TikTok US to under 20%.
The deal, if approved by the Chinese government – a confirmation that has yet to be issued – is poised to resolve a important point of contention between the world’s two largest economies and remove a complicating factor in ongoing trade negotiations. The restructuring is also expected to have considerable implications for the competitive landscape of social media within the United states, where companies like Meta Platforms and Google are vying for market share. Currently, TikTok boasts a user base of 170 million Americans.
Ownership Structure of TikTok US
According to a memo distributed to employees by TikTok CEO Shou Chew, the agreement will establish a new joint venture with a majority of ownership residing with US investors. Bloomberg reported that TikTok and ByteDance have finalized binding agreements with Oracle – which currently provides cloud services for the app and hosts user data in the US and other countries – alongside private equity firm Silver Lake Management LLC and abu dhabi-based investment firm MGX.
These three entities will collectively hold a 15% stake in TikTok US. Affiliates of existing ByteDance investors will control 30.1%, while ByteDance itself will retain the remaining 19.9%.A new seven-member board of directors will govern TikTok US,with a majority of American representation,Chew stated. Echoing details from the original Trump administration proposal, officials indicated that six of the seven board seats will be held by Americans.
Valuation and Financials
The $14 billion valuation represents a significant discount compared to previous valuations, which ranged from $35 billion to $50 billion. Valuing TikTok’s US operations has proven challenging, notably given the complexity and value of its algorithm.
Despite generating over $10 billion in annual revenue, tiktok US is not currently profitable. However, ByteDance is projected to generate approximately $50 billion in profits in 2025, according to Bloomberg News.At a $14 billion valuation, TikTok US’s price-to-sales ratio is approximately 1.4, comparable to mature, low-growth companies like Exxon mobil and General Mills. In contrast, Meta and Alphabet trade at multiples exceeding eight times their sales.
why the Scrutiny?
TikTok’s prominence as a leading social media platform in the United States, rivaling YouTube and Instagram in daily active usage, has drawn intense scrutiny. This widespread engagement makes it a highly attractive platform for advertisers seeking to reach a vast user base.
As former President Trump has repeatedly emphasized,TikTok has become a significant cultural force,particularly among generation Z. The potential for TikTok Shop to compete with e-commerce giants like Amazon and Walmart is also attracting investor attention. TikTok represents one of China’s most successful forays into the global tech sector, a trend that has faced increasing geopolitical headwinds in recent years. even with the sale of a majority stake, ByteDance could retain approximately 50% of the profits generated by the US app, Bloomberg previously reported.
The Underlying Concerns
The US government’s ultimatum to ByteDance stemmed from long-held concerns about potential espionage and data security risks. US lawmakers have expressed apprehension that TikTok could be compelled to share user data with the Chinese government, given China’s national security laws. TikTok maintains it has not been asked to provide such data and would not comply if requested.
American officials also fear the potential for the Chinese government to exploit TikTok user data for blackmail or to manipulate the platform’s algorithm to disseminate propaganda or sow division among Americans. TikTok’s efforts to address these concerns by migrating US user data to Oracle-operated cloud servers in 2022 were deemed insufficient by lawmakers and national security officials.