Last night, TikTok parent ByteDance denied President Trump’s boasts about a $5 billion fund to finance the teaching of ‘the real American history’. Despite this, the deal appears to still be moving forward, at least, according to leaked press reports. Bloomberg revealed Sunday morning that the investors in the deal had agreed on a $60 billion valuation for the new TikTok. That’s 2x the $30 billion number being bandied about back in August.
That’s not all: For the first time, Bloomberg revealed the size of each investors’ stakes. Oracle and Walmart have reportedly agreed to buy 12.5% and 7.5% respectively of a newly established TikTok Global under the deal approved by President Trump. That’s a combined $12 billion tab for Oracle and Wal-Mart.
Beijing’s opposition to the deal has been widely reported in recent weeks. But if accurate, this latest news would suggest these may have been negotiating tactics. It’s not surprising, but this would be just another example of the cooperation and coordination between the CCP and Chinese companies that initially aroused the suspicions of American China hawks.
A $60 billion valuation would leave TikTok with a valuation just shy of now-public Uber, immediately ranking it among the world’s largest ‘unicorns’ – private companies with more than a $1 billion valuation, typically associated with the tech sector and Silicon Valley. At that price, we imagine Beijing would have no problem approving the sale of TikTok’s ‘secret sauce’, a content-recommendation algorithm that Facebook has already emulated with Instagram’s ‘reels’ feature.
Amazingly, it appears ByteDance will retain control of the algorithm, though the Bloomberg report says everything is in flux, even though that was said to be a dealbreaker for Oracle and the other American investors. Even with the algorithm, $60 billion seems high. Without it, such a high valuation seems extremely difficult to justify.
$60 billion valuation for TikTok’s US operations, means Oracle & Walmart pay $12 billion for 20% of new company. Also, plans to IPO new #TikTok Global in US.
China’s ByteDance may heavily cash-out from this ban situation & they even get to keep their algorithm.
— Tola (@adetolaov) September 20, 2020
Note: the $60 billion valuation above is for TikTok Global, not solely the US business, but the point stands
Although Bloomberg implied that details surrounding data security and the company’s back-end operations had been settled, it noted that many details of the deal, including the final valuation, aren’t set in stone. And Beijing hasn’t signed off yet.
Perhaps the most perplexing detail is that the deal, as described, would apparently allow ByteDance to retain majority control, something that was supposed to be a dealbreaker for Republican China hawks including Marco Rubio and Josh Hawley.
The final valuation had not been set as the parties worked out the equity structure and measures for data security, the person said. Terms are still in flux and the proposed valuation could still change. Beijing also has yet to approve the deal, though regulators are said to favor any transaction in which ByteDance maintains control of its valuable recommendation algorithms and other proprietary technology.
ByteDance was pressured into a deal for TikTok when Trump threatened to ban the app in the U.S. over national security concerns.
After Microsoft Corp. made a proposal for a full buyout of the service, ByteDance instead turned to Oracle’s offering in which the Chinese parent will maintain a solid majority stake.
“I approved the deal in concept,” Trump told reporters Saturday as he left the White House for a campaign rally in Fayetteville, North Carolina. “If they get it done, that’s great. If they don’t, that’s OK too.”
ByteDance and Oracle representatives didn’t immediately respond to requests for comment.
Trump has said the deal will create 25,000 jobs in the US, and that the new company “will have nothing to do with China.” Whatever happens next, it seems the Sunday night deadline has been abandoned. But we wouldn’t be surprised if fighting over the algorithm ultimately sinks the deal.