TikTok could draw a range of bidders, but deal would face major hurdles
In the event that TikTok becomes available for purchase, former Treasury Secretary Steven Mnuchin has expressed interest.
Mnuchin, previously a member of former President Trump’s administration, stated on CNBC’s Squawk Box that he intends to organize a team of investors to purchase TikTok. He believes that American companies should have ownership of the app, as he does not see the Chinese government allowing a U.S. company to have ownership in China.
Mnuchin’s remarks came after the House voted 352-65 to a bill that would ban the popular social media app
In the United States, if the owner of TikTok, ByteDance, who is based in China, refuses to sell their ownership share, the app could face consequences. It is unclear at this time who may be part of the investor group or how much TikTok may be worth.
The future is unclear. President Joe Biden has confirmed his intent to sign the legislation if it is presented to him.
If the ruling is implemented, Bytedance will have six months to completely sell off its U.S. TikTok operations to a non-Chinese company. If this does not occur, it will be against the law for app store platforms such as Apple and Google to offer the app.
Who would be interested in purchasing TikTok?
Oracle and Walmart reportedly in talks to make the acquisition
Former President Donald Trump, during his time in the White House, issued a directive in 2020 for TikTok to be sold to an American company. It was reported that Oracle and Walmart were in discussions for this potential acquisition.Walmart and Oracle
The Biden administration maintained the previous administration’s concern about the potential security threats presented by Chinese tech companies, resulting in the decision to not pursue acquiring it.
“It would bring in a lot of jobs to our country.”
Despite originally spearheading the movement to ban TikTok, Trump is now against the proposed legislation to mandate a sale. The presidental hopeful claims that such a move would create numerous job opportunities in our nation.
This measure would give more authority to Facebook.
He has publicly criticized technology company for being involved in his defeat in the 2020 election.
According to an analysis by WedBush Securities, if TikTok is put up for sale, there is a high possibility of various financial and technology companies expressing interest, despite the certainty of a very high price.
Various private equity firms along with a potential consortium are considering TikTok. Additionally, major tech companies such as Microsoft, Apple, Oracle, and a combination of other large players in the technology industry may also be interested in acquiring TikTok, depending on the terms and cost of the deal.
According to the Wall Street Journal, there are other potential bidders, such as former Activision Blizzard CEO Bobby Kotick, who has suggested the possibility to potential partners. The estimated cost for such a partnership is in the hundreds of billions of dollars.
According to data from Pitchbook, ByteDance’s latest funding round in 2023 placed its value at $220 billion. An October estimate by eMarketer states that TikTok generated $36.9 billion in global revenue last year. The research firm predicts that this revenue will increase to $46.6 billion in 2024 and $56 billion in 2025.
According to analysts, the high cost of acquiring TikTok and potential political motives behind a deal may not be the only challenges. The current regulatory environment in Washington D.C. could also pose obstacles for a U.S. buyer. This is because major technology companies like Amazon, Google, and Meta are currently facing lawsuits from the U.S. Justice Department for violating antitrust laws. As a result, it is unlikely that any of these companies would be interested in purchasing an app with 170 million users in the U.S. Similar challenges may also be faced by Apple and Microsoft.
One possibility for ByteDance is to potentially take TikTok public. However, separating the app’s algorithms, which are crucial to any social media company, from its parent company would be challenging and would require close examination by regulators in the United States.
Journey to reach an agreement.
The future of TikTok’s political standing remains uncertain amidst increasing tensions. According to Wedbush, there is a low 25% chance of TikTok being banned in the United States.
A proposed Senate bill would mandate that ByteDance sever its connections with TikTok, but would need a significant majority of 60 votes for it to be passed. This may prove difficult, despite some bipartisan backing for the legislation.
Wall Street analysts stated that Senate Majority Leader Chuck Schumer would need to bring the bill to a vote which could be influenced by his concern for the Democratic party’s chances in close races. If he believes that a vote to ban TikTok could have negative effects on his party, Schumer may choose not to bring the bill up for a vote.
Assuming that a ban is implemented, legal battles from ByteDance could potentially hinder the progression.
Richard Greenfield, an analyst from LightShed Ventures, stated that the outcome of this case is uncertain if it were to go to the Supreme Court, as ByteDance/TikTok may argue for free speech while the U.S. government may argue for national security.
One possible challenge in finalizing a TikTok agreement is receiving cooperation from the Chinese government, as they have stated they strongly oppose a forced sale.
“According to Wedbush’s report, China and Bytedance have no intention of selling the source code to a U.S. tech company. This means any potential strategic buyer would face a complex issue.”
Greenfield stated that there is a challenging and unpredictable path ahead in terms of compelling ByteDance to sell TikTok or face a ban from the United States. It is worth noting that ByteDance is unlikely to agree to a TikTok sale.
Kate Gibson
Source: cbsnews.com