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Despite President Trump’s assertions of U.S. companies to have complete control over TikTok operations, the parent company ByteDance confirmed that it will have 80% control on TikTok Global operations. Oracle gets 12.5% and Walmart 7.5%.
After almost a month of discussions and negotiations, the TikTok deal is finally through. On Saturday, September 19, U.S. President Donald Trump approved the TikTok deal with Oracle Corporation (NYSE: ORCL) and Walmart Inc (NYSE: WMT).
— TikTok_Comms (@tiktok_comms) September 19, 2020
After threatening to ban TikTok citing national security concerns, President Trump said that the deal with Oracle has “my blessings”. Thus, TikTok will continue its operations in the U.S. by floating a new publicly listed company TikTok Global. President Trump said that TikTok has assured us to address the security concerns and adhere to regulatory oversight. Calling this deal a success, President Trump said:
“I have given the deal my blessing. If they get it done that’s great, if they don’t that’s fine too. The security will be 100%. Conceptually it’s a great deal for America. It’ll be a brand new company. It will have nothing to do with any outside land, any outside country, it will have nothing to do with China”.
As a part of TikTok Global, Oracle will become the data partner for the short video-app sharing platform. On the other hand, Walmart’s role will be that of a commercial partner. Both of them are minority investors with Oracle owning 12.% while Walmart owning 7.5% in TikTok Global. TikTok Global will have to publish quarterly business reports facing larger scrutiny from shareholders and regulators.
While President Trump has claimed this deal as a success, the fact is TikTok-parent ByteDance will hold 80% of the TikTok global. This is certainly not close to what the U.S. President was suggesting a complete buyout after issuing an executive order in early August. Thus, despite short of his expectations, President Trump is celebrating this deal.
Trump Claims vs TikTok Rebuttal
Addressing the reporters from the WhiteHouse, President Trump said that TikTok Global will be based out of Texas and would be “totally controlled by Oracle and Walmart”. He also said that the company will pay $5 billion in a donation to an educational fund.
President Trump has stressed that the U.S. government should get its fair share if they help to make this deal. “They’re going to be setting up a very large fund,” Trump said. “That’s their contribution that I’ve been asking for.”
However, things don’t seem to be complete as suggested. On Monday, ByteDance gave a statement having a majority share (80%) in TikTok Global. The company also added that TikTok Global will have ByteDance founder Zhang Yiming along with its existing directors and the chief executive of Walmart Doug McMillon.
ByteDance has also published a blog post dubbed “clarifying groundless rumors about TikTok,” talking about the real picture behind the $5 billion donations. ByteDance said that this figure is just an estimate f the taxes TikTok Global would pay over several years if they are successful.
As per the Bloomberg report, ByteDance is seeking a valuation of $60 billion for TikTok Global. “TikTok Global will also launch a listing plan to further enhance its corporate governance structure and transparency,” said ByteDance.
After Oracle’s role in TikTok Global was clear, Oracle CEO Safra Catz said:
“We are a hundred percent confident in our ability to deliver a highly secure environment to TikTok and ensure data privacy to TikTok’s American users, and users throughout the world. This greatly improved security and guaranteed privacy will enable the continued rapid growth of the TikTok user community to benefit all stakeholders.”
This deal will certainly help Oracle’s cloud-computing business, a sector where the software giant has been desperately eyeing a footing to compete with giants like Amazon.com Inc (NASDAQ: AMZN), Microsoft Corporation (NASDAQ: MSFT), and Google LLC (NASDAQ: GOOG) (NASDAQ: GOOGL). The public listing of TikTok Global will happen in the next 12 months. It would be interesting to see further developments.