TikTok is one of the hottest and largest social media applications around the world – with excellent brand recognition and dependable users.
It can be one of the hardest to sell.
That’s the conundrum facing TikTok as Washington lawmakers push a bill that will force the app’s Chinese parent company, ByteDance, to sell it or face a ban in the United States. The bill passed the House of Representatives on Wednesday, but may face difficulties in the Senate.
There are already rumors circulating on Wall Street about who is likely to be eager about buying TikTok. The rumors intensified on Thursday after Steven Mnuchin, the former Treasury secretary, told CNBC that he was “trying to create a group to buy TikTok because it should be owned by American companies.” Mnuchin said he had spoken to “a combination of U.S. investors” about such a deal.
However, any potential buyer may encounter several obstacles. The Chinese government may block the sale. Under the bill passed by the House, the US president would have to verify that the deal cut the app from ByteDance.
In addition, there may be the price – almost actually high. Research firm CB Insights recently estimated ByteDance’s value at $225 billion, even though it’s unclear how much the U.S. version of TikTok alone will cost.
The price would limit the pool of potential buyers to a coalition of private equity firms; a company behemoth like Microsoft; or a mixture of the two. However, it’s unclear whether antitrust regulators would allow a big company such as Microsoft or Alphabet, which owns YouTube, to buy the app.
A spokesman for the Federal Trade Commission declined to comment on the matter. The Justice Department declined to comment.
The last time TikTok was for sale, ByteDance talked to Microsoft a few potential deal before selecting cloud computing company Oracle. Oracle hired Walmart as a partner, but when the two seemed poised to purchase a stake in the app, the deal collapsed under geopolitical pressure.
Oracle didn’t reply to a request for comment. Microsoft, which was also considering purchasing the app in 2020, declined to comment.
TikTok has said the laws is unnecessary because the app poses no risk to Americans’ data and doesn’t tailor its channels to the whims of the Chinese government. It proposed a plan that will store U.S. user data on domestic servers controlled by Oracle.
Beijing could apply additional government control. This week, Wang Wenbin, a spokesman for China’s Ministry of Foreign Affairs, condemned efforts by U.S. lawmakers to force the sale or ban the sale ICT Tokalthough he didn’t say that the country would outright prevent such a move.
Analysts are skeptical that the Chinese government would allow such a move.
“Are you telling me that China is going to sell this amazing company to a US company just so they can benefit in terms of profitability and forgo all the geopolitical benefits of banning it?” said Rich Greenfield, an analyst at LightShed Partners.
It is unclear what stage Mr. Mnuchin’s talks with investors are at and whether participants have taken the formal steps crucial to finish a possible transaction, such as hiring a financial advisor or formally approaching ByteDance. A spokesman for Mr. Mnuchin declined to comment.
Mr. Mnuchin has a protracted history with TikTok. As Secretary of the Treasury from February 2017 to January 2021, he headed the Committee on Foreign Investment in the United States – a bunch of federal agencies verifying international involvement in American firms. CFIUS was behind the government’s push to get ByteDance to sell its TikTok business in 2020.
Mr. Mnuchin, a former Goldman Sachs partner, now runs the private equity firm Liberty Strategic Capital. It is one of many private equity firms facing a downturn amid mounting regulatory pressure and rising rates of interest. The company recently put up $450 million to purchase the beleaguered New York Community Bank.
For TikTok’s U.S. investors, which include Susquehanna Investment Group and General Atlantic, a sale would almost actually be preferable to a ban. These investors could decide to transfer their shares in ByteDance to any latest owner. General Atlantic declined to comment, and a representative for Susquehanna didn’t reply to a request for comment.
“I have to think that most private investors in TikTok, which include many Americans, would prefer divestment rather than a ban because a ban would destroy a lot of value given the size and value of TikTok’s U.S. user base,” said Peter Harrell, a former public affairs official. national security in the Biden administration.
