ByteDance, TikTok’s parent company, is considering selling its North American operation to Elon Musk, if the company is unable to avoid banning the application in the United States, something that could happen from the 19th of this month. Businessman and Chinese Foreign Ministry spokesman Guo Jiakun declined to comment. A ByteDance representative called the possibility “fiction” and declined to comment on the alleged deal.
According to sources heard by the agency BloombergChinese authorities and company executives discussed the possibility of Musk’s X (former Twitter). This option, however, displeases ByteDance’s advice, which is challenging the app’s ban in the US with the country’s Supreme Court.
Two factors diminish the autonomy of ByteDance’s destiny: the Chinese state has preferential shares in the company, which gives it the right to veto any decision, and Beijing’s export rules prevent Chinese companies from selling their algorithms and software. On the other hand, ByteDance claims that state influence only applies to operations in Chinese territory.
The bill sanctioned in April by Joe Biden provides for the application to be banned in the USA if there is no American buyer. The decision taken hastily by the government reflected a discussion that began in 2020, during Donald Trump’s first administration.
Biden’s signature gave an initial deadline of 270 days (9 months) for the Chinese social network to find an American administrator. This determination could be extended by another 90 days. However, signs that the Supreme Court judges will uphold the law have already led ByteDance leaders to debate contingency plans to understand how TikTok should operate with the new Trump administration.
American lawmakers justify the decision with the argument that the platform represents a threat to American national security due to the possibility of the Chinese government accessing user data.
The blocking of TikTok is expected to take place the day before Trump’s inauguration, on January 20th. During his first term (2017-2021), the Republican tried to ban the social network. This time he asked the US Supreme Court to block the law from taking effect until his inauguration and promised to “save TikTok”.
At the beginning of the negotiations to ban the application, the Chinese government classified the action as “economic bullying” and “looting”. Musk’s involvement with the White House increases the chances of the agreement coming to fruition, as the Chinese believe it would be beneficial to sell the social network to an ally of the president-elect.
“Beijing and Xi Jinping have a strong relationship with Musk, so there would be additional comfort in this potential agreement to avoid a ban on TikTok”, assesses Dan Ives, from the consultancy Wedbush.
Musk spent more than $250 million on donations to Trump’s re-election and was chosen to work in a new Department of Government Efficiency, aimed at “dismantling government bureaucracy, driving “large-scale structural reform” and cutting spending.
Financially supporting the president has not proven to be a bad deal for the billionaire. Since the election, contracts between state-owned companies and Musk’s companies have already been signed, such as NASA’s choice of SpaceX to build a vehicle that will take the International Space Station (ISS) out of orbit at the end of its life. useful in 2030.
“Musk’s purchase of TikTok would significantly increase the value of X, and Musk would likely seek outside investment to acquire this potential golden asset,” says Ives. “It’s also possible that, rather than a complete sale, this could result in a partnership, with Musk in the role of helping to ban TikTok outright in the US.”
The value of the transaction should be between US$40 billion and US$50 billion, according to the consultancy. In 2022, Musk paid $44 billion for Twitter.
What is the advantage for Musk to buy TikTok? In addition to having yet another amplifier of his ideas – the platform has more than 170 million users in the USA -, the owner of X would use the network to reinforce the advertising appeal of his brands.
Musk also founded an autonomous artificial intelligence company, xAI, which is expected to benefit from the enormous amount of data generated by TikTok. In April, Musk said on X that he was against banning TikTok, even if his social network would benefit. “To do so would be contrary to freedom of expression. It’s not what America stands for.”
But it remains unclear whether the sale of TikTok in the US will be a competitive process or a government-brokered deal. If the first option is chosen, Musk will not be alone in the dispute. Billionaire Frank McCourt and “Shark Tank” investor Kevin OLary have already shown interest in the acquisition through Project Liberty, the duo has even said they have discussed the matter with Trump.
In the past, Microsoft also tried to buy the social network, and Oracle, which already has a solid partnership with ByteDance, recently showed interest in the Chinese company.
Is there an alternative for ByteDance to continue operating TikTok?
One possibility is to move US customers to a similar app – from a different brand – to get around the ban, according to a source heard by Bloomberg. But the effectiveness of the measure is quite questionable.
The tendency, then, is that ByteDance prefers to continue its legal battle against the United States.
Why does Musk have a close relationship with China?
The US-China relationship also involves the billionaire because it is there that Musk chose to build one of the largest factories in the world. In 2019, Tesla expanded its operation to Shanghai, where it became its largest production base.
