Finding a buyer for TikTok may not be so easy

NEW YORK - TikTok has what many Silicon Valley companies lust after: A culture-making machine beloved by 100 million Americans and deep-pocketed advertisers. That does not mean they will line up to buy it.

TikTok said on Wednesday that the Biden administration was pushing the company’s Chinese owners to sell the app or face a possible ban.

But there are probably few companies, in the tech industry or elsewhere, willing or able to buy it, analysts and experts say.

At a price of US$50 billion (S$67.34 billion) or more – the value some analysts said TikTok could command – the social media platform would be too expensive for many companies, including competitors like Snap.

The tech giants that could afford it, such as Facebook owner Meta, Google and Microsoft, are likely to shy away for fear of getting caught in years of antitrust scrutiny in the United States.

Then there is the headache of owning a social media company, and figuring out how to handle the endless flood of toxic content.

In addition, it remains unclear how TikTok would fully unravel itself from ByteDance, its parent company in China, or whether any deal would be approved by the Chinese government.

TikTok “has a lot of baggage, and that baggage means that it’s hard to make this a reality”, said Mr Brian Wieser, an independent consultant who focuses on the media and advertising industries.

There may be other options, such as a private equity company swooping in with an offer with a partner, or ByteDance spinning off TikTok into a stand-alone public company.

But if there are a limited number of potential suitors it may complicate the White House’s efforts, and continue to drag out what has already been a years-long battle between Washington and the firm.

TikTok has been in the crosshairs of the Trump and Biden administrations, both of which have said that the app poses a national security threat.

Lawmakers have been increasingly concerned that TikTok could put sensitive user data, like location information, into the hands of the Chinese government. They have pointed to laws that allow Beijing to secretly demand data from Chinese companies and citizens for intelligence-gathering operations.

More than two dozen states have issued bans of the app on state-owned devices, and several pieces of federal legislation are also aimed at banning TikTok.

Mr John Kirby, a spokesman for the National Security Council, declined to comment on Thursday about whether the administration was pushing ByteDance to sell TikTok. But he said that “we have legitimate national security concerns here, and outside of all that, we continue to support bipartisan legislation that’s designed to address those security concerns posed by certain foreign-owned consumer apps”.

TikTok said this week it was weighing its options and that a security proposal it made to the government in August offered the best protection for American users. Under the proposal, the company would spend more than US$1.5 billion to cordon off access to sensitive US user data and offer oversight and transparency around its content recommendations.

TikTok’s chief executive Chew Shou Zi is scheduled to testify before the House Energy and Commerce Committee next Thursday.

Lawmakers are expected to question him about the app’s ties to China and the content it delivers to young people.

Ms Maureen Shanahan, a spokesman for TikTok, said in a statement: “If protecting national security is the objective, divestment doesn’t solve the problem: A change in ownership would not impose any new restrictions on data flows or access.”

A host of technology companies declined to comment or did not respond to requests for comment on Thursday about their interest in buying TikTok, including Apple, Amazon, Google, Meta, Microsoft and Twitter.

The Biden administration’s push for a sale mirrors the effort by the administration of then President Donald Trump three years ago.

At that time, Mr Trump threatened to ban TikTok from Apple and Google’s app stores unless the app was sold to an American company.

A group of federal agencies that review national security concerns related to foreign companies, known as the Committee on Foreign Investment in the US, or Cfius, had recommended such a move.

Possible buyers for the app included Microsoft and the cloud computing company Oracle. But the Chinese government issued export restrictions in August 2020 that potentially allowed Beijing to block a sale.

While Oracle and Walmart ultimately seemed to reach an agreement to buy stakes in the app, resolving Mr Trump’s concerns, the deal never closed.

Multiple federal courts later ruled that Mr Trump did not have the authority to ban the app, limiting the government’s leverage in the case. Oracle has since been working with TikTok to help it store US user data in domestic servers and has been a key partner in its plan to assuage national security concerns.

When President Joe Biden took office, the administration initially focused on negotiating a deal through Cfius with TikTok that would settle the concerns without a forced sale.

The company assumed its talks would resolve soon after it submitted a 90-page proposal to the administration in August, but its efforts have been stymied by several revelations around how ByteDance and TikTok have mishandled US user data.

And now, any potential sale looks even more complicated than before.

“It’s much more fraught on all levels on the economics of it,” said Mr Glenn Gerstell, senior adviser at the Centre for Strategic and International Studies and the former general counsel of the National Security Agency.

“TikTok now has two years of user growth, it’s far more entrenched in terms of its position in American social media, and clearly the tensions with China have greatly increased.” NYTIMES