The hugely popular Chinese-owned short-form video app TikTok, estimated valuation: $50 billion, is in talks to sell portions of itself — possibly to Microsoft — and POTUS wants a piece of the action.
President Donald Trump has said that TikTok poses a national security threat because of its Chinese ownership. The Committee on Foreign Investment in the U.S. (CFIUS), has been investigating TikTok parent ByteDance’s 2017 purchase of Musical.ly, an app that eventually morphed to become TikTok. The committee is ordering ByteDance to divest its TikTok business in the U.S., New York Times reported.
Security concerns over TikTok include influence from the Chinese government such as potential requests to censor material shared on the platform or to share U.S. user data with Chinese officials.
“If the parent company is Chinese, which it is in this case, they are under Chinese security law,” said Christoph Hebeisen, director of security intelligence research at Lookout, a company that focuses on the security of mobile devices. “I don’t think it is a stretch to think if China wanted to access that data they would have a means to do so.”
The U.S. government needs to be paid a “substantial amount of money” as part of any deal, Trump said, and the deal has to be done by Sept. 15, or he will “close down” TikTok.
Trump said at a press conference that TikTok will “close down on September 15th unless Microsoft or somebody else is able to buy it and work out an appropriate deal so the Treasury, I guess you would say, of the United States gets a lot of money.”
Changing ownership is crucial for the app, NYT reported. The U.S. is one of TikTok’s major markets and continued operations in the U.S. are a priority. More than 800 million people around the world use TikTok, especially young people. It’s easy to add music and other audio tracks to videos, which often go viral across Twitter and Facebook.
Trump has the power to force ByteDance to sell its U.S. holdings through the Committee on Foreign Investment in the U.S., Russell Brandom wrote for The Verge.
However, experts say Trump could be setting a dangerous precedent, CNN reported.
“It’s really not for the president to say that a deal can go through or a deal can’t go through, or that a company must pay a ransom to the U.S. government or get a deal done by a particular deadline,” said Avery Gardiner, general counsel and senior fellow for competition, data and power at the Center for Democracy and Technology. “That’s very unusual. It’s more than very unusual. It’s wrong. It doesn’t happen.”
Trump has been threatening to ban the app over security issues. Now he’s presenting a sale to Microsoft as a last chance effort to save it, The Verge reported
Microsoft isn’t bidding for TikTok. It’s bidding for the portion of TikTok in four countries: the U.S., Canada, Australia, and New Zealand. “No one has ever split up a social network along regional lines, much less under threat of a national ban from the president,” Russell Brandom wrote for The Verge.
Trump said he would seek a “very large percentage” of any deal.
Microsoft said it would be open to “providing proper economic benefits to the United States, including the United States Treasury,” CNN reported.
The Committee on Foreign Investment in the U.S. could charge a fee to cover the government’s expenses from the review process, according to Jeffrey Bialos, a partner at law firm Eversheds Sutherland. “The only argument I can see the government making is that they should be compensated for the time and effort they spent on this,” Bialos told CNN. However, “to require that part of the consideration ByteDance is getting from selling its business go to the U.S. government, I think that’s an overreach.”
Making companies pay the U.S. government for mergers is “incredibly dangerous,” said Avery Gardiner, general counsel at the Center for Democracy and Technology, in a CNN interview.
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“I suppose it’s possible that any company could voluntarily write a check to the U.S. Treasury, but making that a de facto requirement for mergers in the U.S. would be incredibly dangerous,” Gardiner said. “To condition deals on requiring a payment to the government would be a drastic change and, in my mind, it would be a terrible mistake.”
Recent events around TikTok will change the way we look at China-based companies or those interested in expanding to China “when the government could block them from crossing into markets,” said Mike Jones, co-founder and managing partner at Science Inc, an L.A.-based incubator and tech studio that backed Dollar Shave Club and Bird.
It’s going to make U.S. companies think twice about purchasing or being purchased by Chinese entities in the tech space, Gardiner said. “I think that does have a chilling effect on the merger landscape.”
