Turnaround: TikTok and the United States discuss postponement of sale

The US government forcing ByteDance to sell TikTok’s US business has ushered in a new turning point.

According to a TikTok American insider to Sina Technology on Wednesday, ByteDance is negotiating with the U.S. government about the possibility of applying for postponement of the transaction, and even hopes that the U.S. government will allow it to change the transaction and sale structure . And behind this is the turning point brought about by the intervention of the Chinese government.

On August 28, the Ministry of Commerce and the Ministry of Science and Technology of China issued the “Catalogue of China’s Export Prohibited and Restricted Export Technologies”, which also includes the artificial intelligence algorithms involved in the byte beating business, that is, “personalized information push service technology based on data analysis” . Subsequently, Bytedance stated that it would “strictly abide by the “China’s Technology Import and Export Management Regulations” and “China’s Export Prohibited and Restricted Technology Catalog” and handle related businesses related to technology exports.”

According to people familiar with the matter, after the intervention of the Chinese government, there have been some changes in the negotiations between ByteDance and the US government. Because if you sell TikTok’s US business that does not include algorithms, it will obviously affect the future competitiveness of TikTok’s US business, affect the acquisition interest of potential buyers, and directly touch the investment interests of Bytedance US investors. Potential buyers of the current TikTok US business include: Microsoft and Wal-Mart joint acquisition, Oracle, Twitter.

“(Potential acquirers) no one wants to buy a short video platform with only users and no technology. They are not Facebook, and it is impossible for them to come up with alternative technologies in the short term to continue to ensure the competitiveness of TikTok’s US business and continue to retain users. If you stay Not to live with users, TikTok US users and the market will be eaten away by Facebook sooner or later. So they hope they can find a solution.” Insiders explained. (Note: Due to antitrust reasons, it is impossible for Facebook and Google to acquire TikTok’s US business)

The person familiar with the matter told Sina Technology that although the U.S. government had previously forced ByteDance to sell TikTok’s U.S. business, in fact, there were also “recruitment” and “extermination” internally. The former is represented by U.S. Treasury Secretary Mnuchin. , The focus is on actual interests; the latter is represented by US Secretary of State Pompeo and White House trade adviser Kudlow, who values ​​political influence. Mnuchin had previously allowed ByteDance to retain a portion of TikTok’s US business, but Trump decided to veto this option after listening to hawks.

Although Facebook has been lobbying the U.S. government to suppress the development of TikTok in the United States, there are other U.S. stakeholders who are pushing the White House to retain TikTok’s business valuation as much as possible so that they can get the maximum return. In addition to Bytedance’s US institutional investors, the potential acquirer Oracle has a very close relationship with the Trump administration. Oracle founder Ellison once offered to provide California golf courses to help Trump organize fund-raising activities, and helped the latter obtain nearly 10 million US dollars during his California trip earlier this year.

Regarding the sale of TikTok USA, there are also obvious differences between the Bytedance board of directors because of different interests. Several US institutional investors hope to successfully complete the TikTok US sale. They can continue to retain their equity and continue to expand their investment income in the future. Therefore, they have been putting pressure on the founder of ByteDance to accept the reality as soon as possible and choose a US strategic partner to sell TikTok’s equity in the United States. They do not want TikTok’s US business to be suppressed and affect their own interests. ByteDance’s US institutional investors include several major fund giants: Sequoia Capital, General Atlantic, and Coatue Management.

TikTok CEO Meyer was recommended by American investors to the founder of ByteDance, so he has always been on the side of American investors to push the founder of ByteDance to sell TikTok America and even divest its global business. Obviously feeling that Meyer’s position is different, the founder of Bytedance also lost trust in the former Disney executive who had high hopes to change TikTok’s regulatory dilemma. After being rejected by the Bytedance founders to participate in the sale negotiations, Meyer subsequently announced his resignation and was in office for only three months.

According to people familiar with the matter, if you want ByteDance to sell TikTok’s US business with algorithm technology, you need more time to apply for a license from the Chinese government, which means that the sale cannot be completed in accordance with the US government’s time requirements. This change brought by the Chinese government gave ByteDance more reasonable reasons to promote American institutional investors and potential acquirers to convince the American government.

In another case, if the Chinese government prohibits ByteDance from selling the algorithm technology behind TikTok, then the two parties within the US government may have to deliberate: it is to execute the presidential order to completely block TikTok’s US business, and no one can get any economic Income; still accept it when you see it, allow ByteDance to retain some rights and interests, so that all parties can get the most benefit from TikTok’s US business.

The person familiar with the matter emphasized to Sina Technology that it is impossible to know whether the government is communicating on this matter, but American investors did contact the US government recently.

In order to force ByteDance to sell TikTok’s US business, US President Trump issued two consecutive presidential orders last month. On August 6th, the White House issued an executive order to prohibit US companies and individuals from having transactions with ByteDance after 45 days; on August 14th, the White House issued another order stating that ByteDance must complete TikTok within 90 days (mid-November) Sale of US business and destroy all data related to US users under the supervision of the US government.

Although the two orders are intended to force ByteDance to sell TikTok’s US business, the two orders do not overlap. The August 6 order invoked the International Emergency Economic Rights Act (IEEPA), determined that TikTok user data may be obtained by the Chinese government, and declared a state of emergency to block ByteDance; while the August 14 order was based on the US foreign The Commission of Investment (CFIUS) determined that the previous acquisition of Musical.ly by ByteDance posed a threat to U.S. international security and announced that it rejected the transaction completed in 2018.

TikTok announced the prosecution of the US government on August 24, and the object of the prosecution was the first order. However, according to previous precedents, there is almost no possibility of success in prosecuting IEEPA. The US legislature has given the president great flexibility to deal with possible national security threats, and the US judicial branch rarely interferes with the president’s administrative operations on national security. .

At that time, it seemed that Bytedance had almost no choice, and could only choose from a few potential acquirers, and the selling price would also be greatly suppressed. ByteDance’s US investors are allowed to retain a minority stake in TikTok’s US business, so their interests will not be affected.

However, the Chinese government’s technological control measures have brought a turning point for ByteDance, and have also made US investors and potential acquirers feel obstacles. They do not want to see TikTok’s US business become a pure user platform without core technology. If this happens, no matter who takes over, it may not be able to continue to operate and maintain TikTok’s US business.

“Although it is still impossible to know the final result of the negotiations between the two sides, at least it is difficult for the United States to swallow TikTok’s US business as easily as previously expected. At least ByteDance can get more time and get a higher selling price.” The person familiar with the matter Said.

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