Oracle and Walmart have agreed to acquire a 20% stake in TikTok’s global business as part of a pre-IPO financing round, the ByteDance owned video-sharing platform announced in a press release on Saturday, moments after President Donald Trump told the press that he had given his “blessing” to the deal.
Oracle and Walmart have agreed to acquire a 20% stake in TikTok Global.
Oracle will acquire 12.5% of the video sharing platform, while Walmart will have a 7.5% stake.
As part of the deal, Oracle will serve as TikTok’s “secure cloud technology provider” and Walmart will be a commercial partner by entering “into commercial agreements to provide our e-commerce, fulfillment, payments and other omnichannel services to TikTok Global,” Walmart said in a statement.
The partnership will create a new company, TikTok Global, that will go public in less than 12 months on a U.S. exchange, and over time “U.S. ownership of TikTok Global will increase and continue to grow,” according to a joint statement from both Oracle and Walmart.
The deal still has to be formally approved by U.S. regulators, but Trump on Saturday told reporters he likes the agreement “in concept” and gives it his blessing, though it still falls short of Trump’s initial ask for TikTok to be sold entirely to a U.S. company.
Trump said the new entity would likely be incorporated in Texas and include a “$5 billion contribution” for a “large fund” for the “education of American youth,” but it’s unclear where exactly the money is going because both Oracle and Walmart referred to it as “5 billion in new tax dollars to the U.S. Treasury.”
Commerce Secretary Wilbur Ross said Saturday night he will delay for a week restrictions set to take effect Sunday that would have banned the app from the App Store and the Google Play Store.
In its press release, Oracle said it will “combine its secure cloud technology with continuous code reviews, monitoring, and auditing to provide unprecedented assurance that U.S. TikTok user data is private and secure.” Earlier this week Bloomberg had reported that Oracle will get full access to TikTok’s source code and updates to ensure the platform’s Chinese parent cannot add any security backdoors to access data from the app’s U.S. users.
The Oracle proposal, which was first announced last week, faced pushback from Republican lawmakers including Sen. Josh Hawley (R-MO) who wrote an open letter to the Treasury Department calling for it to reject the deal on national security grounds. Sen. Marco Rubio (R-FL) and a group of other Republican lawmakers had also written to Trump asking him to reject any deal that would allow “China-based or controlled entities to retain, control or modify the code or algorithms that operate any U.S.-based version of TikTok.”
The White House has targeted TikTok over concerns the Chinese government could force it to hand over data on American users, though TikTok has previously said it would not comply with such a request.
Apart from the U.S. government the proposed deal will also require approval from Beijing, TikTok’s Chinese parent ByteDance had said on Thursday. Last month, the Chinese government added AI technologies—including ‘‘personalized content recommendation” tools like the one used by TikTok—to its export controls list, effectively necessiating the Beijing’s approval for any deal.
TikTok-Oracle deal up in the air as details are disputed
A deal for Oracle and Walmart to acquire stakes in the US operations of popular video app TikTok appeared in jeopardy as details of the complicated arrangement were disputed.
President Donald Trump said on Monday that he would revoke his initial approval of the deal if ByteDance, the Chinese company that owns TikTok, retained a stake in a newly created company that would house the US operations. The three companies said over the weekend they had struck a deal that gives Oracle and Walmart a combined 20% stake in a new company, TikTok Global, that would provide service to American users and run on Oracle's cloud computing service.
TikTok is under scrutiny because it's owned by a Chinese tech company.
"Everything is going to be moved into a cloud done by Oracle," the president told Fox News. "It's going to be totally controlled by Oracle ... and if we find that they don't have total control, then we're not going to approve the deal."
The president's comments came as the partners themselves appeared to have differing interpretations of the deal, which would see the creation of TikTok Global, a US company whose shares would be listed on an American exchange as part of an initial public offering that would take place place "in less than 12 months."
Over the weekend, ByteDance said it would retain an 80% stake in TikTok Global until an IPO occurred. US investors own roughly 40% of ByteDance. On Monday morning, an Oracle executive said ByteDance would have no stake in the new company.
"Upon creation of TikTok Global, Oracle/Walmart will make their investment and the TikTok Global shares will be distributed to their owners, Americans will be the majority and ByteDance will have no ownership in TikTok Global," Ken Glueck, an executive vice president at Oracle said.
The tentative agreement and the disputed understanding of it follow a tumultuous period for TikTok, which Trump has called a national security threat because it's owned by a Chinese tech company. The administration alleges that the Chinese government could use data gathered by the TikTok app to "track the locations of federal employees and contractors, build dossiers of personal information for blackmail, and conduct corporate espionage." TikTok has repeatedly pushed back, noting that it wouldn't turn over data to the Chinese government even if it were asked to.
The deal, which still requires the approval of the Chinese government, came just hours before a ban on new downloads of TikTok was set to take place. Commerce Secretary Wilbur Ross said Saturday that the ban would be pushed out to Sept. 27 at 11:59 p.m.
The administration has issued two executive orders concerning TikTok. An Aug. 6 order would have barred any US transactions with ByteDance and was set to go into effect on Sunday. A separate executive order, issued Aug. 14, ordered ByteDance to sell its US operations by Nov. 12. Trump told reporters on Saturday that he had given his "blessing" to the deal, Bloomberg reported.
Intelligence agencies have determined that Chinese authorities could collect data through TikTok, though there's no evidence they've done so, according to The New York Times. The Wall Street Journal found that the TikTok app for Android surreptitiously collected device identifiers known as MAC addresses. The practice ended in November.
Trump's high-profile attacks on TikTok and ByteDance have already taken their toll on the app, which has an estimated 100 million users in the US. TikTok CEO Kevin Mayer, a former Disney executive, resigned in late August after just three months in the position. He told employees in a letter that the role he signed up for looks different because of the US administration's pressure on ByteDance to sell its US business. Vanessa Pappas, TikTok's US general manager, is the interim head of TikTok.
Two lawsuits have been filed over Trump's executive orders. On Aug. 24, TikTok and ByteDance sued Trump and Ross, alleging the administration had violated the due process clause of the Fifth Amendment because the company wasn't given a chance to be heard. The lawsuit also alleges the president acted beyond his legal authority because his administration hasn't proved that TikTok poses a national security threat. The president's order furthers Trump's "campaign of anti-China rhetoric in the run-up to the US election," the lawsuit says. It's unclear what will happen with the lawsuit now that a deal has been approved.The White House didn't immediately respond to a request for comment.
In a separate lawsuit filed on the same day, Patrick Ryan, a TikTok employee, alleged the administration's actions could prevent the company's 1,500 US workers from being paid. The Department of Justice later said employees could continue to be paid.
The US isn't the only country that's targeted TikTok and Chinese apps. India banned TikTok, along with WeChat and dozens of other Chinese apps in late June, citing national security concerns. The ban came after 20 Indian soldiers were killed during a clash with Chinese troops along a disputed Himalayan border.
TikTok is known for its quirky videos of people lip-syncing and dancing, in clips that run between 15 seconds and 1 minute. But it's also become a hub for political talk ahead of the US presidential election. The app had logged more than 2 billion downloads as of April. TikTok had 689 million monthly active users globally as of July and was available in more than 200 countries. Uncertainty over TikTok's future prompted some US users to direct their fans to their Instagram and YouTube accounts. Facebook , which is notorious for copying its rivals, released a TikTok competitor called Reels on Instagram in early August.
ByteDance purchased Musical.ly for around $1 billion in 2017 and that app, popular among US teens, was rebranded as TikTok.
Walmart Confirms Probable Minority Stake As TikTok Deal Moves Forward
As a complex deal over the fate of video-sharing platform TikTok gradually takes shape, Walmart (NYSE:WMT) announced today in a press release it will likely buy a 7.5% stake in the service. The statement adds that the "partnership will provide Walmart with an important way for us to expand our reach and serve omnichannel customers, as well as grow our third-party marketplace, fulfillment, and advertising businesses."
According to a CNBC report, the latest version of the deal, which may be acceptable to both the U.S. and Chinese governments, would nominally place 53% of TikTok's ownership in American hands.
This includes Walmart's 7.5% stake and Oracle's (NYSE:ORCL) 12.5% stake. The two companies, who are working as allies in closing the TikTok deal, will hold a combined 20%. Also counted is the ownership stake that U.S. shareholders, including venture capital firms like Sequoia and General Atlantic, currently have in TikTok's parent ByteDance. TikTok's board will consist of four American citizens and the CEO of ByteDance, who is a citizen of China.
While Walmart has been in the running for the acquisition of TikTok for weeks, the retail giant is now providing further details of its plans. These include potentially assisting a TikTok initial public offering in the U.S. sometime during the next 12 months, pending regulatory approval. Its e-commerce and payment services, along with other parts of its business, will be used to support TikTok's operations. The new TikTok will bear the name "TikTok Global."
The press release also forecasts the creation of approximately 25,000 jobs related to TikTok in the U.S. All American users' data will be shifted to Oracle's cloud data servers, enhancing data security for approximately 100 million people.
This article originally appeared in the Motley Fool.
Rhian Hunt has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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