TikTok has established a new US data security arm to enact a deal brokered by Donald Trump that will end a years-long geopolitical saga over the fate of the video app while leaving its core US business in the hands of its Chinese parent company.<\/p>\n
The new American-controlled joint venture, unveiled by TikTok<\/a> on Thursday, would \u201csafeguard the US content ecosystem and have decision-making authority for trust and safety policies and content moderation\u201d, the company said. <\/p>\n TikTok said it had appointed a new seven-person board of directors for the joint venture, which included Egon Durban, the co-chief executive of private equity firm Silver Lake, Susquehanna International Group managing director Mark Dooley, and top Oracle executive Kenneth Glueck. <\/p>\n Their companies are all part of the consortium of US investors who will own 80 per cent of the joint venture.<\/p>\n \u201cThe majority American owned Joint Venture will operate under defined safeguards that protect national security through comprehensive data protections, algorithm security, content moderation, and software assurances for US users,\u201d TikTok added.<\/p>\n But the terms of the agreement give Beijing-based ByteDance direct control of the app\u2019s main business lines<\/a> in the US, including ecommerce, advertising and marketing. <\/p>\n Two people familiar with the matter said that many of TikTok\u2019s employees in the US would remain employed by units under ByteDance.\u00a0<\/p>\n \u201c[The deal] saves the US market for TikTok and leaves ByteDance<\/a> with most of the economic benefits,\u201d said one early investor in the Chinese company.<\/p>\n ByteDance\u2019s valuation in private market transactions has risen to about $500bn in recent weeks, two people familiar with the matter said. <\/p>\n Its shares had traded at a valuation below $300bn after a law came into effect requiring that TikTok\u2019s parent sell its stake in the app or be banned in the US.\u00a0<\/p>\n Critics argue that the final structure of Trump\u2019s deal, while delivering easy returns for American investors and introducing some new data protection for US users, appears to fail to fully address national security concerns.<\/p>\n \u201cThere remains a disconnect between the agreement and the spirit\u00a0of what the statue required,\u201d said Brett Freedman, who served as chief of staff of the national security division at the Department of Justice during the Biden administration.<\/p>\n He added: \u201cThere are larger issues at play. We have an administration\u00a0that wants to have a \u2018grand bargain\u2019 with the PRC [People\u2019s Republic of China] and that colours to some extent what they might have agreed to.\u201d<\/p>\n Just over a year ago, TikTok briefly went dark for its 170mn US users after the ban-or-divest law came into effect. <\/p>\n The Joe Biden-era legislation stemmed from concerns that the app could allow Beijing to manipulate the content seen by users for propaganda purposes, or to access data for espionage purposes.\u00a0<\/p>\n Trump, newly elected and enamoured with his popularity among younger voters on the platform, quickly brought the app back online, having promised to \u201csave\u201d it. <\/p>\n Over the past 12 months, the president issued a number of executive orders that extended the deadline for forging a deal. <\/p>\n Vice-president JD Vance was tasked with fashioning a deal that would please the president while gaining approval from Beijing.<\/p>\n A takeover of TikTok\u2019s US business attracted interest from major private equity and venture capital investors such as Andreessen Horowitz, Coatue and KKR, as well as tech groups such as Amazon and Perplexity. <\/p>\n The final compromise is a joint venture majority-owned by the US investors Oracle, Silver Lake and the Emirati investment vehicle MGX, each holding 15 per cent.<\/p>\n Other investors in the consortium include Dell chief executive Michael Dell and the family office of French entrepreneur Xavier Niel \u2014 as well as affiliates of General Atlantic and Jeff Yass\u2019s Susquehanna, which were both previous investors.<\/p>\n ByteDance would take 19.9 per cent of the new company, the most allowed under US law, TikTok confirmed on Thursday.<\/p>\n One investor in ByteDance said that they had trouble understanding how the deal was priced, suggesting that it was cheap for the new US investors and also allowed Trump to continue to benefit from his growing audience on the platform.\u00a0<\/p>\n Vance has said that the deal valued TikTok\u2019s joint venture at $14bn. <\/a>ByteDance anticipates 2025 earnings before interest, taxes, depreciation and amortisation of $66bn on revenues of $192bn, according to one person familiar with the matter.<\/p>\n
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