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TikTok said Thursday it has signed a joint venture deal with investors that would allow the company to maintain operations in the United States and avoid a ban threat over its Chinese ownership.
According to an internal memo, TikTok CEO Shou Chew told employees that the social media company and its Chinese owner, ByteDance, had agreed to the new entity, with Oracle, Silver Lake, and Abu Dhabi-based MGX on board as major investors.
Oracle’s executive chairman and founder, Larry Ellison, is a longtime ally of US President Donald Trump.
“The US joint venture will be responsible for US data protection, algorithm security, content moderation, and software assurance,” Chew said in the memo.
“It will also have the exclusive right and authority to provide assurances that content, software, and data for American users is secure.”
Chew told staff that half of the US venture will be held by a consortium of new investors, including Oracle, Silver Lake and MGX, each with a 15 per cent stake. Affiliates of existing ByteDance investors will own a touch over 30 per cent of the venture, with ByteDance retaining just shy of 20 per cent, the maximum ownership allowed for a Chinese company under the law.
TikTok Global’s US entities will manage global product interoperability and certain commercial activities, including e-commerce, advertising, and marketing, according to the memo.
Chew noted that more work remains to be done ahead of the January 22 closing date for the deal.
The new set-up is in response to a law passed under Trump’s predecessor, Joe Biden, that forced ByteDance to sell TikTok’s US operations or face a ban in its biggest market.
US policymakers, including Trump during his first presidency, warned that China could use TikTok to mine Americans’ data or exert influence through its state-of-the-art algorithm. Trump has delayed enforcement through successive executive orders, most recently extending the deadline into January.
The deal essentially confirms a September announcement by the White House that said a new venture had been agreed with China and would meet the requirements of the 2024 law.
The memo was the first indication that TikTok had signed onto the deal announced by the Trump administration and would have required the approval of the Chinese government to proceed.
Trump, in September, had specifically named Oracle boss Ellison, one of the world’s wealthiest men, as a major player in the arrangement. Ellison has returned to the spotlight through his dealings with Trump, who has brought his old friend into major AI partnerships with OpenAI. He has also financed his son David’s recent takeover of Paramount and is involved in his son’s bidding war with Netflix to take over Warner Bros.
Bytedance did not immediately comment on the deal, but experts said it was a compromise that had averted the blow of losing access to the lucrative US market.
“Keeping the US operation live is itself a victory” for Bytedance, Li Chengdong, founder of Chinese technology consultancy Dolphin, told AFP.
Settling the issue allows Bytedance to focus on new ventures, including artificial intelligence projects, and could help it move towards an initial public offering (IPO), Li said.
