TikTok will live to see another day in the United States.
President Trump has approved a deal between TikTok owner ByteDance, Oracle and Walmart, which averts the ban that was to take effect on Sept. 20. The ban, which would have prevented all downloads of the app in U.S. app stores, has now been postponed by one week.
In a statement, the Commerce Department indicated that the restrictions are now slated to come into effect at 11.59 p.m. on Sept. 27. According to a CNN report, the deal maintains ByteDance as TikTok’s majority shareholder, with Oracle and Walmart cumulatively controlling 20 percent of the company.
So the ownership of TikTok Global will be, according to a person familiar with the matter:— Alex Sherman (@sherman4949) September 20, 2020
Oracle – 12.5%
Walmart – 7.5%
ByteDance – 80% …
But 40% of ByteDance’s ownership is US venture capital funding. That’s how the Trump admin is calculating this deal as “majority US $”
Ownership and Data Access Issues
According to a Bloomberg report, ByteDance is seeking a $60 billion TikTok Global valuation, with the app’s U.S. operations alone valued at over $50 billion. This would mean that Walmart would pay $4.5 billion for its proposed 7.5 percent stake and Oracle would pay $7.5 billion for its prospective 12.5 percent stake.
The report further reveals that the deal’s final valuation and payment structures have not been agreed on yet because negotiations regarding equity structure and data security are still ongoing. Both Beijing and Washington are yet to fully agree on what parties get access to what part of TikTok’s valuable proprietary technology, such as recommendation algorithms.
#TikTok tldr— King Son 景新 (@rikognition) September 20, 2020
-Trump approved Oracle deal
-Oracle gets access to source code -Will ensure there are no back doors/data spying
-Deal includes setting up a new company “TikTok Global”
-Deadline extended to Sept. 27 to see through transaction
-Still needs approval from Chinese govt
According to Bloomberg, Chinese authorities are said to be in favor of the current deal because ByteDance maintains an overwhelming majority stake. This apparently was what gave Oracle the advantage over Microsoft, which offered to buy out TikTok Global in its entirety.
The deal would see Walmart CEO Doug McMillon take a seat on the five-member board of TikTok Global, which controls the app’s activities in the U.S. and around the world, excluding China. According to Bloomberg, VC firms Sequoia Capital and General Atlantic could also build equity positions in the company as part of the deal.
In a statement from TikTok quoted by CNN, the company said:
“We will also maintain and expand TikTok Global’s headquarters in the US, while bringing 25,000 jobs across the country.”
TikTok To Migrate From AWS to Oracle Cloud
The deal will also see TikTok move from Amazon Web Services (AWS), its current hosting provider, to Oracle Cloud. In a statement quoted by CNN, Oracle CEO Safra Catz said:
“As a part of this agreement, TikTok will run on the Oracle Cloud and Oracle will become a minority investor in TikTok Global. Oracle will quickly deploy, rapidly scale, and operate TikTok systems in the Oracle Cloud. We are a hundred percent confident in our ability to deliver a highly secure environment to TikTok and ensure data privacy to TikTok’s American users, and users throughout the world. This greatly improved security and guaranteed privacy will enable the continued rapid growth of the TikTok user community to benefit all stakeholders.”
Imagine you’re the VP Eng at Tiktok who has to tell everyone you’re switching from AWS to Oracle Cloud— Danny Trinh (@dtrinh) September 19, 2020
According to CNN sources, Oracle will get full access to TikTok’s source code and app updates in order to ensure that there are no back doors for the Chinese state to harvest data or spy on the app’s 100 million+ American users.