It's been a strange weekend to end a strange summer for one of the country's most popular social media apps, TikTok. First, in August the Trump administration threatened to ban TikTok unless it found a U.S. buyer. Last weekend, the one and only dark horse Oracle emerged as the winner in a competition commissioned by the federal government for the takeover of TikTok. It turns out, however, that Oracle is not acquiring TikTok at all – and Oracle and TikTok's current parent company, ByteDance, disagree on who will take responsibility.
When you're confused, you are in good company. Here is our attempt to lay out everything we know about TikTok, Oracle, and their previously mysterious deal.
What is TikTok? Whose is this?
TikTok is an extremely popular short-form video app that is used worldwide. The app appeared in its current version after the parent company ByteDance from Beijing took over the US startup Musical.ly in 2017 and integrated it into the existing TikTok product under the name TikTok.
Why is TikTok banned?
President Donald Trump issued an executive order on Aug. 6 classifying TikTok as a national security threat.
TikTok, a mobile video-sharing application by Chinese company ByteDance Ltd., has reportedly been downloaded over 175 million times in the US and over a billion times worldwide. TikTok automatically collects large amounts of information from its users, including internet and other network activity information such as location data, as well as browsing and search history. This data collection threatens to give the Chinese Communist Party access to Americans' personal and proprietary information. China may be able to track the locations of federal employees and contractors, prepare dossiers of personal information for extortion, and engage in corporate espionage.
TikTok has also reportedly censored content that the Chinese Communist Party deems politically sensitive, such as content about protests in Hong Kong and China's treatment of Uyghurs and other Muslim minorities. This mobile application can also be used for disinformation campaigns that benefit the Chinese Communist Party, such as when TikTok videos spread debunked conspiracy theories about the origins of the novel 2019 coronavirus.
For its part, TikTok has vigorously and repeatedly denied that it is relaying US user data through China or giving the Chinese government access to US users' personal information.
The TikTok ban was originally scheduled to go into effect on September 20th.
Is that legal
The White House obviously thinks so. TikTok disagrees. The company filed a lawsuit against the federal government on Aug. 24, arguing that the government's efforts to ban TikTok or force a sale were part of a "political campaign against China" and "not based on serious national security concerns."
So is TikTok banned?
Not yet. The Department of Commerce released a week-long extension of the theoretical ban on TikTok from September 20 to September 27 late on Saturday. You can download, update, and use TikTok however you want in the US today.
They will likely issue another extension before the new appointment next Sunday, unless something else unforeseen happens.
Why isn't TikTok banned now?
Before issuing the executive order, Trump issued a personal ultimatum to TikTok in early August, according to which it must find a US buyer or be subject to a ban. A second Executive Order (PDF) dated August 14th retrospectively stated that ByteDance should not have been allowed to purchase Musical.ly at all, and required that TikTok be returned to a US owner.
Microsoft had been in talks since early August to take over some or all of TikTok's operations. Oracle and Walmart both entered the race later that month. On late September 13, the Wall Street Journal first announced that Oracle, led by Trump supporter Larry Ellison, had ended up winning.
Did Oracle buy TikTok?
Oracle hasn't or is buying TikTok – but it is investing in the company.
As of the current understanding of the transaction, ByteDance has outsourced TikTok operations in the US and most other countries to a new company, TikTok Global.
Oracle will initially have a 12.5 percent stake in TikTok Global and will also act as the cloud hosting provider for the new company. Walmart will hold another 7.5 percent stake. ByteDance holds the remaining 80 percent. The new company also plans to launch an initial public offering of shares before the end of 2021. We know that for sure.
What other conditions are there to the deal?
Oracle and Walmart promised that TikTok Global's investment would create 25,000 jobs in the U.S. that Trump now appears to be saying will be based in Texas. The president also first said in August that he wanted the Treasury Department to get a large portion of the deal.
"We set a date, I set a date, around September 15th. At that point there will be no more business in the US. But if someone, Microsoft or someone else, buys it, that's interesting" Trump told reporters at the time, adding:
Most of all, I said that a very significant portion of this award must go to the United States Treasury Department. Because we make it possible for this deal to happen. Right now they have no rights unless we give them to them. So if we want to give them the rights, then it has to come to this country …
So it's going to close on September 15th, unless Microsoft or someone else can buy it and work a deal, a decent deal, so the United States Treasury Department – really the United States Treasury Department, gets a lot of money. A lot of money.
Can he ask for that?
Nobody has ever done it before, and no legal mechanism is known to do it, but the lack of precedents or mechanisms has not yet been a guard rail for action by the current administration. The US government can impose certain conditions of sale and conduct on mergers and acquisitions to ensure compliance with antitrust laws, and of course, impose taxes on transactions if necessary. However, commissions or setbacks are usually not part of the process.
Trump said Saturday the companies would meet his conditions by setting up "a very large fund" for education initiatives in Texas. "This is your contribution that I asked for," he added.
Walmart and Oracle said in their joint statement that TikTok Global would pay more than $ 5 billion in taxes to the Treasury Department. The companies also confirmed some of the comments made by Trump's "Education Fund" but paid no attention to that particular post, saying instead, "TikTok Global will partner with Oracle, SIG, General Atlantic, Sequoia, Walmart and Coatue to create an education initiative development and deployment an AI-driven online video curriculum designed to teach downtown children to suburbs, a variety of courses, from basic reading and math to science, history and computer engineering. "
So will TikTok belong to China or the US?
Whether this planned transaction will put the company in the hands of the US is apparently up for debate.
Around 40 percent of ByteDance itself is held by US investors. Proponents of the deal claim the ownership would result in roughly 53 percent of TikTok Global being owned by US investors, giving the US majority control.
Ken Glueck, Managing Director of Oracle, said today: "With the formation of TikTok Global, Oracle / Walmart will make their investment and TikTok Global shares will be distributed to their owners, Americans will be the majority and ByteDance will have no ownership of TikTok Global . "
ByteDance doesn't see it that way. In a statement translated and reported today by CNBC and the Wall Street Journal, the company made it clear that in addition to not retaining its core resources, Oracle is not gaining control of the company.
Instead, according to ByteDance, TikTok Global will be founded as a wholly owned subsidiary. That subsidiary will then run a round of funding (with Walmart and Oracle apparently providing these funds) that will reduce ByteDance's stake to 80 percent. "The current plan does not provide for any transfer of algorithms and technologies. Oracle is authorized to review TikTok USA's source code for security reasons," added ByteDance.
"Eighty percent owned" and "no owned" are quite a long way apart, and it's unclear at best how that difference ends up reconciling.
So Trump approved the deal, right?
Yeah … until maybe he doesn't anymore.
Trump gave the deal his "blessing" on Saturday night and told reporters that he had "approved the deal in concept".
Shortly after the president's remarks, TikTok issued a statement confirming approval of the transaction. Around the same time, Oracle and Walmart issued a joint statement confirming the president's "preliminary approval" of the transaction.
Trump touted the deal in an interview with Fox & Friends on Monday, but secured himself against full approval.
"It will bring 25,000 jobs and it will be in Texas and they are looking forward to it," Trump said. "So they move it to our country. I like it. But we'll see how it comes out. There can be no security risk."
"It is completely controlled by Oracle," added Trump. "If we find that they don't have complete control, we won't approve the deal."
Will China approve the deal?
That's another huge shrug. The answer, as far as anyone can tell, is probably. China's export ban prevents TikTok's own assets from being sold to the United States, but appears to allow an investment like the Oracle proposal.
Chinese state-run newspaper Global Times described the deal this morning as "unfair" but "reasonable," reports CNBC, noting that the plan would be better than a ban or a full sale to US interests.
Hours later, Global Times editor-in-chief Hu Xijin said on Twitter, "Beijing will not approve the current agreement between ByteDance, the parent company of TikTok, and Oracle, Walmart, based on the agreement." would endanger China's national security, interests and dignity. "
The Wall Street Journal reports that the experts on China are mixed, finding that the deal is a "daylight robbery" and that it is a win for both China and ByteDance.
Does anyone have to unsubscribe?
Yes. Here in the States, the United States Foreign Investment Committee (CFIUS) must also approve the proposed deal.
CFIUS reviews transactions in which a foreign company acquires an interest in a US company for possible national security concerns. Trump's second TikTok executive order, on August 14, calls for CFIUS to oversee the sale of ByteDance's US operations. The order stipulates a period of 90 days for this sale, which is valid until November 12th.
Multiple Republican Senators including John Cornyn (R-Texas), Josh Hawley (R-Mo), Marco Rubio (R-Fla.), Rick Scott (R-Fla.), Thom Tillis (RN.C.) and Roger Wicker (R-Miss.) Everyone publicly objected to the proposed deal. All senators urge CFIUS to reject the proposal, arguing that it will not be enough to prevent the national security threat that required a ban or sale in the first place.
US Treasury Secretary Steven Mnuchin remains confident that CFIUS will give the proposal the green light, Bloomberg reported today, but officials are also reportedly preparing for Trump to change his mind and reject the deal.