Caixin
Aug 04, 2020 05:26 PM
BUSINESS & TECH

Update: Trump Gives September Deadline for TikTok Sale, Demands Government Get a Cut

Microsoft’s announcement was the first public confirmation that it is seeking to acquire TikTok’s U.S. operations.
Microsoft’s announcement was the first public confirmation that it is seeking to acquire TikTok’s U.S. operations.

President Donald Trump said he would shut down TikTok in the U.S. by mid-September unless its local operations are sold to Microsoft Corp. or another domestic bidder, later adding that a “substantial portion” of the sale price would need to be paid to the U.S. government.

Trump said Monday he didn’t mind which company buys the short-video app’s U.S. operations, as long as it is “a big company, a secure company, a very American company.”

It’s the latest salvo in the fight over the wildly popular social video app which has been accused of handing user data over to Beijing and threatening U.S. national security — claims its owner, ByteDance Ltd., denies.

On Friday, Trump threatened to “immediately” ban the company from operating in the U.S. but then appeared to back off the proposal after discussing its potential purchase with Microsoft CEO Satya Nadella on Sunday.

By Monday, Microsoft’s stated plan to reach a deal with ByteDance by Sept. 15 had hardened into a White House-mandated deadline, after which Trump said Tiktok would be “out of business in the United States.”

Trump’s authority to push for a large payment to be made to the government as part of a deal his administration forced has been questioned, and some in the U.S. likened the comments to extortion.

“I did say that if you buy it… a very substantial portion of that price is going to have to come into the Treasury of the United States because we’re making it possible for this deal to happen,” Trump told reporters on Monday.

“Right now, they don’t have any rights unless we give it to them… It’s a great asset, but it’s not a great asset in the United States unless they have the approval of the United States.”

Mixed messages

Microsoft Corp. confirmed it was still looking to acquire the U.S. operations of TikTok over the weekend, after mixed messages from the Trump administration about the app’s future there last week.

In a Sunday statement, the American tech giant said it had decided to continue discussing the plan after Nadella’s discussion with Trump, and gave the Sept. 15 target date for the deal with ByteDance.

On Monday, ByteDance founder and CEO Zhang Yiming sent out an internal letter (link in Chinese) that acknowledged for the first time the “real possibility of a forced sale of TikTok’s U.S. business … or an executive order banning the TikTok app in the U.S.”

In the letter, Zhang said the company is still looking at other possibilities besides a sale, and that it will “initiate preliminary discussions with a tech company” to ensure American users can still use the app.

Some ByteDance investors had proposed Zhang retain a minority stake in TikTok’s U.S. operations, Caixin had learned. However, the company has decided to discuss a 100% stake sale in the app’s U.S. operations amid White House pressure, multiple media outlets reported.

In comments made in a group chat and circulated online Tuesday, former Google China president Kai-Fu Lee rejected comparisons between the current situation and China’s 2010 ban on Google.

That’s because the U.S. did not say what needs to be done for TikTok to continue operating, nor provide evidence for the complaints against it, said the Beijing-based computer scientist who previously also worked for Microsoft.

“A forced acquisition + only 45 days + intermediary fees are not comparable to Google,” Lee said. “It’s unfathomable.”

ByteDance under fire

ByteDance has been one of the most prominent companies caught in the crossfire of worsening China-U.S. relations, with TikTok in recent months facing accusations from U.S. officials and lawmakers that it may be feeding users’ data to the Chinese authorities and undermining U.S. national security. ByteDance has repeatedly denied such allegations.

To assuage these data security concerns, Microsoft said in its statement that, if the acquisition goes ahead, it would ensure that all the private data of TikTok’s American users is “transferred to and remains in the United States.” Also, Microsoft said it would delete any U.S. users’ data that is currently stored outside the U.S. after it was transferred.

The North American nation has been TikTok’s second-largest market, where it had been downloaded a total of 165 million times as of the end of March, accounting for 8.2% of the app’s global downloads, according to Sensor Tower. TikTok’s largest market was India, but it has been banned there since June.

ByteDance’s U.S. expansion made a significant step forward when it bought another app, Musical.ly, in late 2017 and folded the latter’s services into TikTok. However, this deal drew regulatory scrutiny, with the Committee on Foreign Investment in the United States (CFIUS) launching an investigation in November.

The CFIUS investigation concluded that no action from TikTok would be able to address the national security concerns, a source familiar with the situation told Caixin. The source added that the results of the probe had been presented to Trump and suggested TikTok should be controlled by an American company.

 Read More 
Cover Story: Will TikTok Be the Next Huawei?

Global ambitions remain

Microsoft’s announcement was the first public confirmation that it is seeking to acquire TikTok’s U.S. operations. Earlier, two sources familiar with the matter told Caixin that Microsoft had signed a letter of intent with ByteDance to pave the way for the U.S. software giant to acquire part of the latter’s business.

The deal was brokered by Nadella and potentially also involves the sale of TikTok’s operations in Canada and Australia, markets that are operated by U.S.-based teams, one of the sources said at the time. Additionally, rather than an outright ban, Trump had originally favored a sale to social media giant Facebook, the source added.

However, Zhang didn’t want to sell part of his company to Facebook, which is seen as a rival, the other source said. Meanwhile, a sale to Microsoft is seen more as an alliance, the source said.

Despite pressure to sell operations in some part of the world, the source said ByteDance will still continue its global expansion strategy, and continue its operations in the important European markets.

This story has been updated with additonal information.

Contact reporter Mo Yelin (yelinmo@caixin.com) and editor Joshua Dummer (joshuadummer@caixin.com)

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