General Atlantic and Sequoia Capital are pushing for a possible bid on TikTok by a group that includes Oracle, according to the Wall Street Journal. Kelly O'Grady, dot.LA Chief Correspondent and Former Disney Senior Analyst, Corporate Strategy and Business Development, joins Yahoo Finance’s Zack Guzman to discuss.
ZACK GUZMAN: We got some interesting new developments in the drama surrounding the pressure for TikTok, the social media company owned by China's ByteDance, to sell its US business here to some US tech companies. And, of course, they're not too happy with those plans, suing the US government to challenge the ban initiated here by the Trump administration. And we also got the update from "The Wall Street Journal" reporting tech firms there, investment firms General Atlantic and Sequoia Capital might be interested in pairing up with Oracle to go ahead and make a bid of their own. Of course, we've highlighted Microsoft and Twitter have both been interested in their own bids for TikTok.
And joining us now to discuss all this is Kelly O'Grady, dot.LA chief correspondent and former Disney senior analyst of corporate strategy and business development, again on the show. Kelly, good to see you. Again, when we talk about it, obviously, this drama is playing out on a pretty quick timeline here, since you did have the timeline imposed by the Trump administration to get a deal done to get TikTok sold to one of these US tech companies. But what's your take on now how Oracle might be joining with General Atlantic and Sequoia Capital and what it says about how this drama continues, as they battle the Trump administration over the ban as well now?
KELLY O'GRADY: Yeah, this was a weird one, honestly, to have Oracle jump in, when Microsoft and Twitter in talks. It made sense for them to purchase that. They do have a foothold in the consumer-facing business, whereas Oracle is mainly B2B. But I think what you're seeing is General Atlantic and Sequoia have board seats at ByteDance, the parent company of TikTok. And they were kind of concerned that Microsoft was potentially just going to buy this outright and they weren't going to be able to participate in the upside of their previous investment.
The weird thing for me is that because they both are board members of ByteDance, you have a little bit of conflicting interests here with General Atlantic and Sequoia leading this charge with Oracle. On the one hand, you have them having to have that responsibility as a board member to maximize the value for ByteDance in selling off their prized crown jewel. But on the other hand, you want them to-- or you have them wanting to get the best possible price, right, rather than to capitalize on the potential upside here. So that's a little bit strange for me to see this playing out.
In terms of Oracle owning TikTok, it doesn't really make sense. They're a B2B company. Microsoft and Twitter are certainly better options here, unless you could see potentially six months, a year down the line, in a highly unlikely, but potential-- an IPO spinoff situation. Otherwise, to me, it doesn't really make sense for Oracle to hop in the game here. But we'll see how it pans out.
ZACK GUZMAN: Yeah, I know, there's a lot of interesting dynamics, and, as you highlighted there, some conflict of interest, perhaps, there, as well as all the legal issues around this. I guess it was interesting, too, to see TikTok challenge the idea of a ban here, but not challenging the timeline imposed on getting a deal done, which I guess might indicate, too, that we're seeing a lot of progress on the deal front. But what's your take on-- obviously, this is going to be a very fast deal for a very expensive company. Fire sale price might be bringing that down. But what do you think about, I guess, the expedited nature of something like this, and again, as you said, a very unique case?
KELLY O'GRADY: Yeah, well, you never want to be under a time crunch when it comes to M&A. I've done some deals in my previous life as a Disney analyst, and that's never a situation that's fun to be in. So I think what you're seeing is a couple of different things. The fact, as you mentioned, that they didn't push back in the lawsuit against the CFIUS deadline of November is a major indicator that there is a deal going on here, that talks are proceeding as planned.
I think that what you're try-- what you're seeing them do with this, this lawsuit, is they're backed into a corner. They really have nothing to lose as TikTok right now. And so there is a possibility to push out that September ban, depending on how the courts react to this lawsuit, which could alleviate that pressure that I was alluding to surrounding the M&A deal.
They could push it out as late as November, which also gets into this interesting territory around the November election, right? A lot of folks think that there may be a change in the government's stance towards TikTok if President Trump isn't elected for another term. But this, we do have to remember, has bipartisan support. And you even had presidential candidate Joe Biden telling his staff to delete TikTok from their phones.
So I think you're seeing this lawsuit try and alleviate some of that pressure. But it's never a situation you want to be in, especially as the market is so competitive right now, with Trippler and Reels getting into the game and really just scooping up some of these competitors, making the value of this asset over the next couple of weeks start to deteriorate.
ZACK GUZMAN: Now, Reels is a very interesting one. We've seen a lot of reviews out on that, kind of trashed when it comes to a comparison to TikTok. A lot of the content I've already seen is just TikTok videos reposted to Reels. But that's another discussion.
The interesting combination here, I guess connecting factor specifically for you, too, is that you worked with Kevin Mayer when he was at Disney and you were at Disney, worked closely. Now, of course, he's the CEO of TikTok over there. But shifting back to Disney, interesting to see their lead in terms of what we've seen versus the traditional media giants there in dominating this direct-to-consumer, a piece that he used to lead there. According to a new report there from Macquarie Research, highlighting the fact that Disney leads all those traditional giants, bringing in an estimated $11.2 billion this year-- expected to bring that in-- in direct-to-consumer revenue. That'd be nearly a fifth of its total sales.
What do you make of that, considering how quickly they were able to get Disney+ up and running ahead of expectations? Still shy of Netflix's $25 billion, but again, leading those other traditional giants. What's your take on how quickly that was to be done, and whether or not it means Disney's in a position of strength here to just completely ditch its theater partners?
KELLY O'GRADY: Yeah, this is such an interesting development, honestly. It's just grown so quickly. And $11.2 billion is what they're projecting this year, as you mentioned. That's roughly 45% of Disney's media network's revenue in total in 2019, encompassing everything from ABC to ESPN to Freeform. So that's a really big jump.
A couple of things come to mind, though-- I really question whether this growth is sustainable in a post-pandemic world, if we ever reach that. Because you're seeing companies like Netflix and Disney just dominate because we're all at home watching this content with very little else to do. So you could see this massive growth just slow a little bit after the pandemic is over and we're all back out in society.
But something interesting that came out of the recent Disney earnings call is that they are planning to release a star-branded streaming service internationally. So that's going to cover everything from ABC, Freeform, FX, Fox Films, which, of course, they got in the Fox acquisition, as well as that star brand. It brings to mind that this is really what they're doubling down on. This is what they see as the future.
It makes the question what they're thinking about Hulu long-term, because that certainly played that factor for their other non-Disney-branded content in the past in the States. But I think this is what you're seeing. You're starting to see this tension of is Disney a media company? Is it a tech company? It's blurring that line.
And I'm personally very interested what happens in a couple of weeks when they release "Mulan," which was supposed to be one of its big summer movies in the theater, on Disney+. You could see this as an experiment that if this is really where they're going to put their money and their vision as a company going forth, more of that coming in the future.
ZACK GUZMAN: I'm very bullish on the idea that that's going to smash expectations, when we think about "Mulan" and every one stuck at home here. But you're right to raise what the world looks like in a post-pandemic situation. And clearly, right now, investors less concerned about struggling parks business, still wholly focused on Disney+.
But Kelly O'Grady, dot.LA chief correspondent, I always love having you on to chat. A lot of topics here. Thanks for fitting them all in.
KELLY O'GRADY: Thanks, Zack.