Trump gives TikTok his blessing in deal with Oracle and Walmart

21 Sep 2020149 Views

Image: © tashatuvango/Stock.adobe.com

As part of the deal, Oracle and Walmart would own a combined 20pc stake in the newly formed TikTok Global business.

On Saturday (19 September), US president Donald Trump said that he agreed to a proposed deal between TikTok, Oracle and Walmart, which was put together to ensure that the ByteDance-owned social media company could continue operating in the US.

Trump told reporters outside the White House: “I have given the deal my blessing – if they get it done that’s great, if they don’t that’s OK too. I approved the deal in concept.”

TikTok’s future in the US was under threat after Trump signed an executive order against the app last month, stating that it would be banned unless it was sold by its Chinese parent company. Trump claimed that the step was necessary to deal with the “national emergency” posed by the app.

The deal in concept involves Oracle and Walmart taking a combined 20pc stake in the newly formed TikTok Global business. In a joint statement, the US companies said that TikTok Global would be responsible for “providing all TikTok services to users in US and most of the users in the rest of the world”.

They claimed TikTok Global will be an independent American company, headquartered in the US. The statement also promised that this business would create more than 25,000 new jobs in the US and pay more than $5bn in new tax dollars to the US Treasury.

Deal details

Oracle said that it would take a 12.5pc stake in TikTok Global and become the video-sharing platform’s cloud provider in the US. Walmart also tentatively agreed to purchase a 7.5pc stake, with its CEO Doug McMillon joining the board of the newly created company.

Sources told CNBC and others that ByteDance will own the remaining 80pc of TikTok Global. This was confirmed in a statement from ByteDance today (21 September). However, Oracle and Walmart’s statement claimed TikTok Global would be “majority owned by American investors” because, as many publications pointed out, 40pc of ByteDance is currently owned by US venture capital firms.

Oracle and Walmart added that TikTok Global would have an initial public offering (IPO) within a year and be listed on a US exchange. “After the IPO, US ownership of TikTok Global will increase and continue to grow over time,” they added.

In a statement over the weekend, TikTok said that it is “pleased” that the proposed deal will resolve security concerns and settle questions around the video-sharing app’s future in the US.

Support Silicon Republic

“As part of this proposal, Oracle will become our trusted technology provider, responsible for hosting all US user data and securing associated computer systems to ensure US national security requirements are fully satisfied. We are currently working with Walmart on a commercial partnership as well,” it added.

“Both companies will take part in a TikTok global pre-IPO financing round in which they can take up to a 20pc cumulative stake in the company. We will also maintain and expand TikTok Global’s headquarters in the US, while bringing 25,000 jobs across the country.”

Reports suggest that ByteDance is looking for a combined $12bn from Walmart and Oracle for their stakes, which would value the company at $60bn.

A fund for education

As well as paying more than $5bn in new taxes to the US Treasury, Oracle and Walmart also said that they would work with TikTok Global investors to build and provide online videos to teach kids about history, science and other subjects.

Trump said that the companies were making a $5bn contribution towards an education fund. “We’re going to be setting up a very large fund for the education of American youth and that’ll be great,” he said on Saturday. “That’s the contribution I’ve been asking for.”

According to Reuters, ByteDance said on Sunday that it was not aware of the $5bn education fund that Trump mentioned. The TikTok owner said that it has been committed to investing in the field of education and plans to work with partners and global shareholders to launch online classroom projects based on AI and video technology for students around the world.

The South China Morning Post reported that it is unclear if the $5bn fund Trump mentioned was related to Oracle and Walmart’s statement about tax.

In response to the tax claim, ByteDance said: “The specific tax amount still depends on the development of the business and the tax structure in the US. The tax forecast has nothing to do with this cooperation plan.”

Updated, 10am, 21 September 2020: This article was amended to clarify details of TikTok Global’s ownership structure.

Kelly Earley is a journalist with Siliconrepublic.com

editorial@siliconrepublic.com