TikTok has signed a joint venture deal with investors to maintain operations in the United States and avoid a ban over its Chinese ownership. The move comes after a lengthy tussle over the video-sharing app in the world’s largest economy, where TikTok claims to have over 170 million users.
According to an internal memo, TikTok CEO Shou Chew informed employees that the social media company and its Chinese owner ByteDance had agreed to the new entity. Major investors, including Oracle, Silver Lake, and Abu Dhabi-based MGX, are on board. Oracle’s executive chairman, 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. It will also have the exclusive right to provide assurances that content, software, and data for American users are secure. The venture will be owned by a consortium of new investors, including Oracle, Silver Lake, and MGX, which will each hold 15%. Affiliates of existing ByteDance investors will own just over 30%, while ByteDance will retain nearly 20%, the maximum allowed for a Chinese company under US law.
The deal is in response to a law passed under President Joe Biden that forced ByteDance to sell TikTok’s US operations or face a ban. US policymakers, including Trump, had warned that China could use TikTok to mine data from Americans or exert influence through its algorithm. The new setup confirms a September announcement by the White House that a new venture had been agreed upon with China to meet the requirements of the 2024 law.
The deal allows TikTok to maintain its presence in the US market, which is crucial for the company’s growth. Beijing’s foreign ministry spokesman Guo Jiakun did not directly address reports of the deal, reiterating that China’s position on the TikTok issue is consistent and clear. Experts say the compromise averts the blow of losing access to the lucrative US market and allows Bytedance to focus on new ventures, including artificial intelligence projects, and potentially move towards an initial public offering (IPO).
The US market is of paramount importance to TikTok, but the deal does not guarantee smooth sailing going forward. The US side could still leverage its regulatory power to impose unfair demands on TikTok. The deal is set to be finalized by January 22, and TikTok will need to comply with the new regulations to maintain its operations in the US.