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ByteDance may miss the U.S. deadline for TikTok scheduled for the 20th of September. The Trump administration may force a sale by mid-November.
ByteDance Ltd, the parent company of TikTok, may miss the sale of the U.S. arm of its video-sharing app. The Chinese company may need more time beyond the deadline to reach an agreement with a buyer.
Before now, Microsoft Corporation (NASDAQ: MSFT) and Oracle Corporation (NYSE: ORCL) have submitted proposals to acquire the U.S. arm of TikTok. This happened after President Donald Trump issued a ban on the social media app in the US. Separately, Trump also approved a decision by the Committee on Foreign Investment in the country to force a sale by mid-November.
ByteDance to Miss U.S. Deadline for TikTok Deal
According to the U.S. government, the ban is because TikTok is a risk to national security. ByteDance however argued that the decision to ban is without adequate notice and deny the Chinese company of its rights.
Presently, the U.S. government is yet to decide whether to extend the earlier 45-day notice or go on with the ban.
Recently, Beijing also updated export controls, which now affect the artificial-intelligence technology that TikTok uses. The new export rule will jeopardize the whole deal because the algorithm cannot exist on its own. The algorithm has to do with how users’ identities are managed as well as tools used in videos uploading.
As a result, TikTok’s parent company ByteDance will need approval from the Chinese government to sell TikTok U.S. This appears to be an obstacle to meeting the deadline set for the 20th of September. Bloomberg reported that the aim of the rule, according to a familiar source, is to slow down the sales process.
Although the new Chinese export regulations have interfered with deal talks, both Microsoft and Oracle are still willing to go ahead with the acquisition. Also, the two groups requested that ByteDance should get explicit clarity from the government on the restriction.
TikTok is the Most Valuable Privately-Held Company
According to Bloomberg, ByteDance founder Zhang Yiming has been hesitant about selling the U.S. arm of TikTok. As for Yiming, the video-sharing app is a long-term rival for Facebook Inc (NASDAQ: FB) and Google LLC (NASDAQ: GOOGL).
A Pitchbook report showed that TikTok is worth $75 billion and is the world’s most valuable privately-held company. Business Insider also revealed that thirty-five-year-old Yiming made more than $12 billion on TikTok in 2018. As noted by Forbes, Yiming is now worth $16.2 billion.
Lately, the U.S. and the Chinese government have been involved in a trade war. In 2018, the Trump administration began setting tariffs on over $360 billion of Chinese goods. In response, China also imposed tariffs on more than $110 billion of U.S. products.
Amid battles between TikTok and the U.S. government, Kevin Mayer resigned from his role as the CEO of TikTok. Before his resignation, Mayer had only been in the company for less than three months. Before joining TikTok on the 1st of June, Mayer was a top streaming executive at The Walt Disney Company (NYSE: DIS).