Oracle TikTok investment wins Trump’s blessing: Deal at a glance

Oracle Corp. is the winning bidder for a deal with TikTok’s U.S. operations, people familiar with the talks said, after main rival Microsoft Corp. announced its offer for the video app was rejected. (Bloomberg)

Oracle Corp.’s agreement to take a stake in TikTok has won the long-awaited blessing of U.S. President Donald Trump.

The proposal, which would give Oracle and other investors minority ownership of a new company called TikTok Global, still needs approval from regulators in China, where TikTok’s parent ByteDance Ltd. is based.

Trump’s praise for the agreement suggests that weeks-long deliberations over the fate of a popular music and video-sharing app are nearing completion. ByteDance began holding discussions with investors in its U.S. operations after the Trump administration threatened to shutter the business, saying that it poses a threat to national security.

While some of the terms remain undetermined, here’s what’s known about the deal, based on public statements and people with knowledge of the matter:

What We Know

Who’s in and who’s out

Oracle plans to take a 12.5% stake in a round of financing that would precede an IPO

TikTok also said that together, Oracle and Walmart Inc. could end up with as much as 20%

The new company, called TikTok Global, will seek a U.S. IPO and raise a pre-IPO round of financing

Existing Bytedance investors that could participate in the pre-IPO round include Sequoia Capital, General Altantic and Coatue Capital

A host of other companies made proposals or considered bidding. Microsoft Corp. was rebuffed because it wanted to control all of TikTok in the U.S., a condition that didn’t sit well with Beijing

What the deal looks like

Oracle will be TikTok’s “trusted technology provider,” meaning Oracle will house the entity’s data in its U.S. servers — a boon to a cloud computing business that has lagged behind those of Amazon.com Inc., Alphabet Inc. and Microsoft.

It will also get access to monitor TikTok’s source code and algorithms

Walmart Chief Executive Officer Doug McMillon will sit on Tiktok Global’s board and is discussing a commercial partnership with TikTok

TikTok Global will likely be headquartered in Texas and will hire at least 25,000 people, Trump said, without mentioning a timeline for those hires

ByteDance would retain a majority stake in TikTok’s assets and control the closely guarded algorithm that determines what clips users see

The new company will hold an initial public offering in about a year

How the parties are addressing security concerns

Oracle will review TikTok’s full source code and updates to make sure there are no back doors that could be used by ByteDance to gather data or spy on the app’s 100 million or so American users

Oracle will be able to continue to review the technology as updates come in to make sure there are no new points of access to the data

TikTok was able to convince the U.S. government that TikTok Global would be controlled by American investors by counting the passive stakes of existing shareholders in TikTok’s Chinese parent, people familiar with the matter said.

Although Bytedance will retain an 80% stake in the new company, because existing U.S. investors hold a 40% stake in ByteDance, the math works out to 53% ownership by U.S. companies and investors

Whether Trump will get a payout

TikTok Global will use proceeds of the IPO to create a $5 billion education fund

“They’re going to be setting up a very large fund,” Trump said Saturday. “That’s their contribution that I’ve been asking for”

What We Don’t Know

What China thinks

The Chinese government will also have to approve ByteDance’s plans under new restrictions Beijing imposed on the export of artificial intelligence technologies, Bloomberg News reported earlier

As of earlier this week, ByteDance was growing increasingly confident that the proposal would pass muster with Chinese regulators, people familiar with the matter told Bloomberg

Early reaction from Chinese state media appeared positive. “This scheme is still unfair, but it avoids the worst result that TikTok is shut down or sold to a US company completely,” wrote Hu Xijin, the influential editor in chief of China’s state-owned Global Times

Fate of the Commerce Department’s ban

The Commerce Department said Saturday it will push a ban back by one week that would bar TikTok from the Apple Inc. and Android app stores, extending the Sept. 20 deadline set by President Trump

???? The Indian Express is now on Telegram. Click here to join our channel (@indianexpress) and stay updated with the latest headlines

For all the latest Technology News, download Indian Express App.