TikTok's American dilemma

While the US government has now moved one step closer to forcing China’s ByteDance Ltd. to divest its gem of an asset, TikTok, how could tha [View in browser]( [Bloomberg]( [by Alex Barinka]( While the US government has now moved one step closer to forcing China’s ByteDance Ltd. to divest its gem of an asset, TikTok, how could that actually work? But first... Three things you need to know today: • Memecoin trading frenzy [shows no signs of stopping]( • OpenAI inked licensing deals with [Le Monde and Prisa]( • Cyber startup Wiz will buy Gem Security [for $350 million]( Finding a deal Before I covered social media at Bloomberg, my beat was tech deals, breaking news on all things M&A and IPOs. So when the US House of Representatives on Wednesday passed a bill that would force Chinese tech giant ByteDance Ltd. to divest TikTok, or face a ban on the popular video app in America, it got my old deals spidey senses tingling – especially because the legislation doesn’t specify what kind of corporate structure would make lawmakers happy. The bill is born out of concerns that China, through ByteDance, could access data from TikTok’s 170 million monthly US users or somehow influence what Americans see on their feed. It’s not law yet – it still needs to pass in the Senate and get a presidential signature – but it’s the furthest a TikTok-focused bill has gone. Let’s assume the bill clears all the big “ifs” — including a vociferous legal challenge from TikTok — and becomes law. Then what could a feasible deal look like? Let’s start with what we know: The law would force the divestiture of large social media companies (like TikTok, which it calls out by name) that are at least 20% owned by people in a foreign adversary country or are subject to the direction of a foreign person or entity. After a separation, the president would need to determine it’s no longer a “foreign adversary controlled application” and there’s no operational relationship with the former parent. We also [know]( that 60% of ByteDance shares are owned by institutional investors like Carlyle, General Atlantic and Susquehanna; 20% by ByteDance employees globally; and 20% by the company’s Chinese founder, Zhang Yiming. Within the parent company, TikTok’s exact structure is unclear. Read More: [US House Passes Bill That Would Force TikTok Sale or Ban It]( Many folks have talked exclusively about a divestiture as a sale to another large company. TikTok’s US business may be valued at $40 billion to $50 billion, Bloomberg Intelligence estimated last year, a number that could be even higher with its fledgling e-commerce business. The list of cash and/or equity buyers is short. Meta Platforms Inc. and Alphabet Inc. would be hard-pressed to clear antitrust review; probably as would Amazon.com Inc., which is a competitor to TikTok Shop. Oracle Corp., TikTok’s current data protection partner and former suitor, is saddled with debt from a past deal. There might be another way. When Trump [tried to ban TikTok in 2020](, the company considered a partial separation via an IPO. Back then, the structure included a stake sale to Oracle, with ByteDance retaining majority ownership. Mixing a consortium of investors with a public listing may fit the bill, and give shareholders peace of mind with an immediate path to liquidity. But it’s unclear to me how the government plans to police foreign ownership when there are public shareholders involved. A standalone, private TikTok could also potentially work, purchased with a cocktail of cash and debt. We have a recent comparison in Twitter, which included about a third of debt in Elon Musk’s $44 billion purchase. While not a take-private, per se, a carveout could have a similar look with a consortium of venture and corporate investors going in on the deal. While private equity firms typically like to see more debt involved, some might jump in for a company like TikTok. Still, as a company that’s spending to build a new e-commerce operation, adding debt could crimp TikTok’s growth plans. There are still a ton of unanswered questions, and the Chinese government has voiced its opposition to the bill. US lawmakers who voted for the proposal don’t seem to care. Any deal would have to get done in about six months after the legislation was signed or risk TikTok being banned from app stores and internet providers in the US – an immense sprint in the deals world to go from shopping any kind of transaction to closing it. Obviously none of these options would make ByteDance happy. TikTok Chief Executive Officer [Shou Chew](bbg://people/profile/19257745), [in a post Wednesday on X](, made it clear the company has no intention of selling. If the bill becomes law, Chew said, it “will lead to a ban of TikTok in the United States.” TikTok plans on fighting the bill’s passage through the Senate and exhausting every legal option first. Divestiture, for now, is its last resort. — [Alex Barinka](mailto:abarinka2@bloomberg.net) The big story Microsoft is planning to release artificial intelligence tools [that will help clients track hackers by writing incident reports]( and free up cyber professionals to focus on more complex tasks. Microsoft’s Copilot for Security was unveiled about a year ago and has been undergoing trials with corporate customers since. One to watch [Watch US Representative Buddy Carter interviewed on Bloomberg Television about legislation approved by the House to ban TikTok in the US.]( Get fully charged Stacy Smith, a former Intel chief financial officer, will rejoin the company as a board member [to aid in the chipmaker’s comeback effort](. SpaceX will have a third attempt to launch its Starship rocket [on Thursday.]( The Securities and Exchange Commission will proceed with its suit accusing Genesis and Gemini of [illegally offering unregistered securities.]( X canceled a partnership with former CNN anchor Don Lemon after the broadcaster [interviewed Musk on Friday.]( Epic asked a federal judge to hold Apple in contempt for breaking an order to open its App Store [to outside payment options.Â]( More from Bloomberg Get Bloomberg Tech weeklies in your inbox: - [Cyber Bulletin]( for coverage of the shadow world of hackers and cyber-espionage - [Game On]( for reporting on the video game business - [Power On]( for Apple scoops, consumer tech news and more - [Screentime]( for a front-row seat to the collision of Hollywood and Silicon Valley - [Soundbite]( for reporting on podcasting, the music industry and audio trends - [Q&AI]( for answers to all your questions about AI Follow Us Like getting this newsletter? 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