As the United States government intensifies pressure on TikTok to cut off ties with China or get booted out, the parent company, ByteDance has succumbed to the demands of Trump’s administration as it seems to be the only way out.
ByteDance has offered to forgo its stake in TikTok to a US-based firm in order to stop the video app from being blocked in the United States.
US president Donald Trump said on Friday that he would ban the TikTok within days, because the app poses a security risk under its Chinese parent.
“Not the deal that you have been hearing about, that they are going to buy and sell… we are not an M&A (mergers and acquisitions) country,” Trump said.
The deteriorating relationship between China and the United States was about to claim another victim after Huawei, and ByteDance only had to choose between its stake and the survival of TikTok.
ByteDance had previously wanted to keep a minority stake in the US business of TikTok, but Trump’s administration turned the move down, leaving the Chinese company with no other option than to totally relinquish control.
Microsoft has been at the forefront of the takeover deal alongside Sequoia and General Atlantic who reportedly proposed $50 billion. But TikTok executives believe the app is worth more than that.
Changing his mind on Sunday, Trump agreed only to allow Microsoft to negotiate the acquisition, and gave the tech company 45 days to seal the deal.
Trump said the idea of ban was canceled following a discussion between him and Microsoft CEO Satya Nadella, who said the deal will be closed on September 15. People familiar with the matter said the date was set by the Committee on Foreign Investment in the United States (UFIUS), which oversees deals such as this in the interest of national security.
Sources said there was intense pressure on Trump by his advisers and members of the GOP not to ban TikTok, as it would alienate him from many of its young users ahead of the November presidential election. The app has become popular among generation x who the GOP is counting on for Trump’s reelection, and they know it would spell doom if Trump does anything to irk them now.
TikTok has over 100 million users in the US and it is recording more downloads outside the United States, which will offer Microsoft the opportunity to contend with Facebook having owned the professional network platform, LinkedIn.
But the deal may likely stir a complicated relationship between Microsoft and Facebook. Microsoft invested $240 million in Facebook in 2007, and the two companies had collaborated in many innovative fronts.
As part of the deal, Microsoft will ensure that the US security concerns are addressed.
“Microsoft fully appreciates the importance of addressing the president’s concerns. It is committed to acquiring TikTok subject to a complete security review and providing proper economic benefits to the United States, including the United States Treasury,” Microsoft said in a statement.
However, there are still concerns about how TikTok could be separated from ByteDance’s technology infrastructure and access to satisfy US’ curiosity about the safety of personal data.
Reuters reported that one idea under consideration is to grant ByteDance and Microsoft a transition period to develop technology for TikTok that will be completely separate from ByteDance.
The tech company said the new structure would build on the experience TikTok users currently love, while adding world-class security, privacy, and digital safety protections. The operating model for the service would be built to ensure transparency to users as well as appropriate security oversight by governments in these countries.
And to quell privacy concerns, Microsoft said it will delete and transfer data accordingly to protect privacy.
“Among other measures, Microsoft would ensure that all private data of TikTok’s American users is transferred to and remains in the United States. To the extent that any such data is currently stored or backed-up outside the United States, Microsoft would ensure that this data is deleted from servers outside the country after it is transferred,” Microsoft said in a statement.
Microsoft did not say how much the deal is worth, but said it may invite other American companies to acquire minority stakes. The deal is expected to cover TikTok in Canada, Australia and New Zealand.