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TikTok Deal Moves Forward After Presidential Blessing

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TikTok Deal Moves Forward After Presidential Blessing

American tweens can breathe a little easier today after TikTok narrowly avoided a U.S. ban thanks to a new deal.

Oracle teamed up with Walmart to craft a new deal for TikTok’s U.S. operations. This comes after a previous agreement failed to pass President Trump’s muster. Under the terms of the newly revised deal, Oracle and Walmart will form a partnership with TikTok parent company, Beijing-based ByteDance Ltd. They will form a new U.S.-based company under the name TikTok Global.

The Commerce Department said it will postpone its ban on U.S. downloads by one week in response to the new agreement. The ban was previously scheduled to go into effect at 11:59 P.M. on Sunday. However, the delay took place to give the participating companies time to iron out the details.

American investors will end up owning a majority interest in TikTok Global. The companies say the newly-formed company will make its public debut on a U.S. exchange within 12 months of the deal’s approval. Insiders say the companies expect the deal to be valued at roughly $60 billion.

Terms of the TikTok Deal

Under the terms of the partial acquisition agreement, TikTok Global will host its data on Oracle’s cloud. This will then eliminate the potential for the Chinese government to access the data. However, some U.S. hardliners say the arrangement doesn’t do enough to protect American users.

“No matter where the actual data is housed, there can be something in that code that sends it the other way,” Senator Marco Rubio (R-FL), a well-known China hawk, said on Fox News. “I think we have to be very careful in looking at that provision, because if there’s any opportunity whatsoever for China to continue to collect personal data on Americans, then we can’t be supportive of that deal.”

President Trump had originally pushed for a full acquisition of TikTok’s U.S. operations by an American company. However, it seems he has eased off those requirements. The current deal doesn’t involve a full acquisition by a U.S. company. Additionally, ByteDance will retain an 80% ownership stake in TikTok Global. However, U.S. investors own 40% of ByteDance. Therefore, technically, American companies would have majority control, according to people familiar with the deal.

Walmart and Oracle’s combined 20% in TikTok global would bring the new company’s total American ownership stake to 53%. Although, the deal falls short of the full acquisition initially sought by the White House.

Criticism on Trump

President Trump is drawing some criticism for backing down from his original ‘line in the sand’ ultimatum. However, some experts say the deal is a necessary compromise between the U.S. and Chinese demands that allows both sides can save face.

“The TikTok deal allows Trump to claim victory and portray it as a validation of his tough, take-no-prisoners approach in dealing with China, even if the final deal represents a compromise relative to the administration’s initial set of demands,” Eswar Prasad, former head of the International Monetary Fund’s China division, told the Wall Street Journal.

Oracle and Walmart released a joint statement touting the deal. The companies say TikTok Global will have its headquarters in the United States. The new business will create 25,000 U.S. jobs. It will also generate more than $5 billion in new tax revenue for the U.S. Treasury.

Secretary of State Mike Pompeo says the deal goes far enough to satisfy the president’s concerns regard Chinese access to U.S. user data. “There will be an American headquarters, it will be controlled by Americans,” said Pompeo. “Most importantly, the data, the very reason we have gone after TikTok, that data will be in a place that we have confidence that no American will have the risk that their data will end up in the hands of the Chinese Communist Party.”

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