ByteDance asserts control of TikTok and contests $5 billion fee

Topics ByteDance | TikTok | Donald Trump

President Trump signed an executive order on Aug. 14 giving ByteDance 90 days to relinquish ownership of TikTok
ByteDance emphasised it will remain in control of a hived-off TikTok Global business, appearing to contradict US President Donald Trump’s statements about how the new entity will be directed by Americans and pay an unusual $5 billion fee to the US government.

 

ByteDance and Oracle issued conflicting statements on Monday over the terms of an agreement they reached with the White House over the weekend to allow TikTok to continue to operate in the US, casting doubt on Trump's preliminary blessing of the agreement.

 

ByteDance was racing to avoid a crackdown on its popular short-video app after the US Commerce Department said on Friday it would block new downloads and updates to the app. US officials had expressed concern that the personal data of as many as 100 million Americans that use the app was being passed on to China's Communist Party government. A successful deal would allow Trump to drop his threat of shutting down TikTok and avoid alienating its army of young users ahead of the November 3 US election.

 

ByteDance said on Monday that it will own 80 per cent of TikTok Global, a newly created US company that will own most of the app's operations worldwide.

 

ByteDance added that TikTok Global will become its subsidiary.

 

Oracle and Walmart, which have agreed to take stakes in TikTok Global of 12.5% and 7.5% respectively, had said on Saturday that majority ownership of TikTok would be in American hands. On Monday, Oracle said ByteDance's ownership of TikTok would be distributed to ByteDance's investors, and that the Beijing-based firm would have no stake in TikTok Global.

 

Trump signed an executive order on Aug. 14 giving ByteDance 90 days to relinquish ownership of TikTok. Oracle's account of the deal would mean that ByteDance would be complying with that order, while ByteDance's account would represent a policy reversal for Trump.

 

The White House referred to a Fox News interview on Monday, in which Trump said that Oracle and Walmart will have "total control" over TikTok.

 

"If we find that they don't have total control, then we're not going to approve the deal," Trump said.

 

The Commerce Department postponed a ban on downloads and apps to the TikTok app that was due to take effect on Sunday by one week, to give the companies time to finalize the deal.

 

The Committee on Foreign Investment in the United States, a U.S. government panel that reviews deals for potential national security risks, has been overseeing the negotiations.

 

Some sources close to the deal have sought to reconcile the discrepancies by pointing out that 41% of ByteDance is owned by U.S. investors, so by counting this indirect ownership TikTok Global would be majority owned by U.S. parties. One of the sources said the deal with Oracle and Walmart values TikTok Global at more than $50 billion.

 

ByteDance on Monday also confirmed plans for an initial public offering of TikTok Global. The Beijing-based firm said TikTok Global's board of directors will include ByteDance founder Zhang Yiming as well as Walmart's chief executive Doug McMillon and current directors of ByteDance. The company declined to further comment on who else would be among the directors.

 

Oracle and Walmart said in a joint statement on Saturday that four out of the five board of directors will be Americans.

 

The current plan for TikTok Global does not involve any transfer of algorithms or technologies, and Oracle will be able to inspect TikTok U.S.'s source code, ByteDance said. This is akin to U.S. companies such as Microsoft Corp sharing their source code with Chinese technology experts, ByteDance added. Oracle and Walmart have said all of TikTok's technology will be in possession of TikTok Global.

 

EDUCATION FUND

 

ByteDance also said a $5-billion payment of taxes TikTok Global is reportedly supposed to make to the U.S. Treasury is based on estimated income and other taxes the company will need to pay over the next few years, and has nothing to do with the deal reached with Oracle and Walmart.

 

Trump last week had said there would be a $5-billion U.S. education fund as part of the deal, but ByteDance has said it was not aware of this.

 

ByteDance owning the majority of TikTok Global and the algorithms means that ByteDance is "not out of the game" and has avoided the worst-case scenario, China's state-run newspaper Global Times said in an editorial published on Sunday.

 

But on Monday, Global Times editor-in-chief Hu Xijin tweeted: "Based on what I know, Beijing won't approve current agreement between ByteDance, TikTok's parent company, and Oracle, Walmart, because the agreement would endanger China's national security, interests and dignity." China's foreign ministry did not immediately respond to a request for comment.



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