China's ByteDance signs deal to form joint venture to operate TikTok US app

WASHINGTON: TikTok's Chinese owner, ByteDance, on Thursday signed binding agreements to hand control of the short video app's U.S. operations to a group of investors, including Oracle, in a big step toward avoiding a U.S. ban and ending years of uncertainty.

AI Brief

TikTok and ByteDance signed binding agreements with Oracle, Silver Lake, and MGX to create TikTok USDS Joint Venture LLC.
The deal, closing January 22, resolves long-standing US national security concerns and ensures TikToks continued operation for 170M Americans.
Oracle, Silver Lake, and MGX will own 45% of the new entity, while ByteDance retains 19.9% ownership.

The deal is a milestone for the short video app used regularly by more than 170 million Americans after years of battles that began in August 2020, when President Donald Trump first tried unsuccessfully to ban the app over U.S. national security concerns.

Financial terms of the deal, announced in an internal memo by TikTok (U.S.) seen by Reuters, were not disclosed.

Other details of the deal are in line with those outlined in September, when Trump delayed until January 20 enforcement of the law that bans the app unless its Chinese owners sell it amid efforts to extract TikTok's U.S. assets from the global platform. He also declared the deal met the terms of the divestiture requirements under a 2024 law.

The new U.S. company will be valued at around US$14 billion, Vice President JD Vance said in September. That was below analysts' estimates and the final figure was not made public on Thursday.

Under the agreement, American and global investors including cloud computing giant Oracle, private equity group Silver Lake and Abu Dhabi-based MGX will hold an 80.1% stake in the new TikTok USDS Joint Venture LLC, while ByteDance will retain 19.9%.

QUESTIONS OVER ONGOING CHINESE ROLE

The White House said in September the new joint venture would operate TikTok's U.S. app, but questions remain about the deal, including the business relationships between the new joint venture and ByteDance.

The White House on Thursday referred questions about the deal to TikTok.

TikTok CEO Shou Zi Chew told employees the joint venture would "operate as an independent entity with authority over U.S. data protection, algorithm security, content moderation and software assurance," according to the memo seen by Reuters.

Chew added that U.S. entities of ByteDance-controlled TikTok "will manage global product interoperability and certain commercial activities, including e-commerce, advertising, and marketing" separately from the joint venture.

Rush Doshi, who served at the National Security Council under President Joe Biden, said it was unclear whether the algorithm had been transferred, licensed or was still owned and controlled by Beijing, with Oracle merely providing "monitoring".

In September, Reuters reported, citing sources, that ByteDance would maintain ownership of TikTok's U.S. business operations but would cede control of the app's data, content and algorithm to the joint venture.

The joint venture would serve as the backend operations to the U.S. company and handle U.S. user data and the algorithm, sources said at the time, adding a separate division that will continue to be wholly owned by ByteDance would control the revenue-generating business operations such as e-commerce and advertising.

Those arrangements formed the deal contour announced on Thursday, two sources with knowledge of the matter told Reuters on Friday.

The ByteDance-controlled TikTok U.S. entity would be the revenue generating one, while the new joint venture will receive a portion of the revenue for its technology and data services, the sources said.

The sources declined to be named due to the sensitivity of the matter. The White House, ByteDance and TikTok US did not immediately respond to Reuters requests for comment on the deal details.

State-run China Daily earlier on Friday reported on the revenue arrangement between the two entities.

The deal, set to close on January 22, would end years of efforts to force ByteDance to divest its U.S. business over national security concerns.

Representative John Moolenaar, a Republican who chairs the House Select Committee on China, said previously he would host the leadership of the new TikTok entity at a hearing in 2026.

The agreement over TikTok’s U.S. operations includes the appointment by ByteDance of one of seven board members for the new entity, with Americans holding the majority of other seats.

Oracle will serve as the "trusted security partner" responsible for auditing and validating compliance including "safeguarding sensitive U.S. user data, which will be stored in a trusted and secure cloud environment in the United States run by Oracle," TikTok said in the memo to employees.

'BILLIONAIRE TAKEOVER'

Trump credited TikTok with helping him win reelection last year and has more than 15 million followers on his personal TikTok account. The White House also launched an official TikTok account in August.

Democratic Senator Elizabeth Warren said there were many unanswered questions over the deal.

"Trump wants to hand over even more control of what you watch to his billionaire buddies. Americans deserve to know if the president struck another backdoor deal for this billionaire takeover of TikTok," she said on X.

Trump has a close relationship with billionaire and Oracle CEO Larry Ellison and his family. Paramount Skydance is trying to acquire Warner Bros Discovery in a hostile takeover bid with the financial backing of the Ellison family.

Trump said in September that Michael Dell, the founder, chairman and CEO of Dell Technologies, Rupert Murdoch, the chairman emeritus of Fox News owner Fox Corp and newspaper publisher News Corp, and "probably four or five absolutely world-class investors" would be part of the deal. It was unclear if Dell and Murdoch participated in the final deal.