ByteDance’s US investors are reviewing a range of options to address US government concerns over TikTok while salvaging their investments, including steps to take voting control of the popular video-sharing app, said people familiar with the matter.
The US lawmakers’ move this week to advance a bill to force a separation of TikTok from Chinese-owned ByteDance over national security concerns has caught investors by surprise, sending them scrambling to respond. ByteDance’s US investors include the likes of private equity firm General Atlantic as well as Susquehanna International Group and Sequoia Capital.
One idea that has gained traction among some of US investors is to stop ByteDance from having a say over how TikTok is run while allowing it to keep its existing stake in the business. Discussions are in the early stages and would need approval from the Chinese government, these people cautioned.
The model that some of ByteDance’s US investors are evaluating is similar to Shari Redstone’s National Amusements, which controls Paramount despite having a stake in the Hollywood media company of only about 10 per cent, people following the matter closely said.
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Under such an arrangement, the investors could also add a US technology partner to secure the data of US citizens and guarantee that no information is handled or monitored by Chinese-related entities.
One potential partner could be Oracle, which reached an agreement with ByteDance in 2020 to keep operating TikTok in the US after then-president Donald Trump issued an executive order blocking the app and giving ByteDance 90 days to divest from its American assets and any data that TikTok had collected in the US.
ByteDance then agreed to spin-off TikTok’s global operations into a new US-based company part owned by Larry Ellison’s software group and Walmart, the largest US retailer, but the deal fell apart after President Joe Biden came into power and rescinded Trump’s order.
While US investors hold significant stakes in ByteDance, founder Zhang Yimeng has shares with special voting rights that give him control of the company and its subsidiary TikTok.
Beijing has repeatedly made clear it would not allow Washington to force a sale of TikTok and in August 2020 unveiled new export controls governing algorithms such as the one that powers TikTok, which Chinese officials have said give the country a say on any sale or divestiture.
Investors’ options for monetising their shareholdings in privately held ByteDance have been narrowing, with the group postponing an intended Hong Kong listing several times since Beijing launched a crackdown on major tech groups in late 2020.
Meanwhile, other parties have expressed interest in acquiring TikTok from ByteDance. On Thursday, former Treasury secretary Steven Mnuchin said he was putting together a consortium to make a bid for the platform, although he did not provide details on how he would finance the transaction.
Mnuchin, who led the Treasury department under Trump, was a big proponent of removing the app from Chinese ownership and has maintained it poses a national security risk though he stopped short of advocating for a ban.
Susquehanna and General Atlantic declined to comment. Sequoia did not immediately respond to a request for comment. – Copyright The Financial Times Limited 2024
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