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TikTok: Trump backs Oracle deal, delays app store ban

Suban Abdulla
·4 mins read
Under the deal, a new company, which will be called TikTok Global, will be set up. Photo: Sheldon Cooper/SOPA Images/LightRocket via Getty
Under the deal, a new company, which will be called TikTok Global, will be set up. Photo: Sheldon Cooper/SOPA Images/LightRocket via Getty

TikTok is on course to escape being banned in America, after US president Donald Trump gave his blessing for the Oracle (ORCL) deal.

Speaking to reporters on Saturday as he left the White House for a campaign rally in Fayetteville, North Carolina, Trump said: “I approved the deal in concept. If they get it done, that’s great. If they don’t, that’s fine too.”

Shortly after Trump signalled his approval, the US commerce department delayed the app store ban, which was due to come into force on Sunday, delaying it to 27 September.

On Sunday, a judge in California, blocked the commerce department from requiring Apple (AAPL) and Google, to remove Tencent-owned (TCEHY) WeChat, for downloads in their app stores.

US magistrate judge Laurel Beeler said in an order that WeChat users who filed a lawsuit “have shown serious questions going to the merits of the First Amendment claim, the balance of hardships tips in the plaintiffs favor.”

It comes after months of intense negotiations between ByteDance and the Trump administration, after the US president signed several executive orders over concerns the app posed a national security threat.

Under the deal, a new company, which will be called TikTok Global — headquartered in the US — will be set up. The company will be majority owned by ByteDance, the Chinese tech firm could retain as much as 80% ownership, including its US arm and the rest of the world, excluding China.

TikTok Global has agreed to funnel $5bn ($3.9bn) to the US, it will also set up an education fund, the announcement has satisfied Trump’s previous demand that the government should receive a payment from the deal.

“They’re going to be setting up a very large fund. That’s their contribution that I’ve been asking for,” Trump said.

ByteDance has said in a social media post that it is not aware of setting the $5bn education fund.

Beijing is yet to approve of the deal.

On Saturday, China announced sweeping powers to curb trade, investment and operations of foreign firms deemed “unreliable” on a blacklist, in a retaliation against punitive US actions towards Chinese businesses, such as Huawei.

READ MORE: TikTok and WeChat: Here’s all you need to know about what is happening

Meanwhile, Bloomberg reported that a source familiar with the matter said TikTok’s parent company, ByteDance is seeking a $60bn valuation, as Oracle and Walmart (WMT) take stakes in the video-sharing app’s US operations to address security issues.

Talks are still ongoing and the final valuation has not yet been set, but the companies said an initial public offering (IPO) would be launched within 12 months.

“Both Oracle and Walmart will take part in a TikTok Global pre-IPO financing round in which they can take up to a 20% cumulative stake in the company. We will also maintain and expand the US as TikTok Global's headquarters while bringing 25,000 jobs across the country,” TikTok said in a statement.

Oracle will take a 12.5% stake in TikTok Global, while Walmart’s investment will give it a 7.5% share.

Under their partnership, the retail giant “will bring its omni-channel retail capabilities including its Walmart.com assortment, e-commerce marketplace, fulfilment, payment and measurement-as-a-service advertising service,” to the popular video-sharing app, Walmart said.

In a joint statement, Oracle and Walmart said that TikTok Global will be an independent American company, with four American citizens out of the five member board of directors. Walmart’s CEO, Doug McMillon will become director of the new company.

READ MORE: China targets foreign firms on ‘unreliable entities list’ as US trade war intensifies

Larry Ellison, Oracle co-founder, chairman and CTO, is a public supporter of Trump and has held a fundraiser to help get the US president re-elected in 2020, while Oracle CEO Safra Catz was part of Trump’s transition team after he was elected president in 2016.

Originally, Trump asked ByteDance to sell TikTok’s entire US operations, with American national security officers arguing this was the only way to ensure China wouldn’t have backdoors into the app to spy on US citizens.

Under the deal, ByteDance will keep control of the algorithm as it previously said it would not sell or transfer the source code behind its popular video app TikTok.

However, Oracle will get full access to review TikTok’s source code, to ensure China has no back doors in the app’s data, according to people familiar with the matter.

CEO Safra Catz said: “Oracle will quickly deploy, rapidly scale, and operate TikTok systems in the Oracle Cloud.

“We are a 100% confident in our ability to deliver a highly secure environment to TikTok and ensure data privacy to TikTok’s American users.”

Previously, ByteDance rejected a bid to buy TikTok outright by US tech giant, Microsoft (MSFT).

Beijing based, ByteDance — worth $140bn — is the world’s most valuable start-up, according to market researcher CB Insights.