TikTok is not getting banned in the U.S. after all. U.S. President Donald Trump on Saturday (September 19) said he had given the deal between TikTok's parent company ByteDance and Oracle his blessings that will allow the app to continue in America.
On Friday (September 18), the U.S. Department of Commerce said that the popular short-video app would be removed from app stores in the country that would bar any new downloads and updates. The company received time till November 12 to avert a total ban and get a deal done with Oracle or any American company to keep operating in the U.S.
The TikTok deal was getting complicated with the Chinese government prohibiting its companies to sell artificial intelligence algorithms on which the app's feed is based on. Oracle could only be a trade partner in the U.S. and not the sole owner — something experts were not keen to see as it would still allow ByteDance access to users' personal information and data could be sent to servers in mainland China.
New Deal
The new deal, which ByteDance values at $60 billion, is a compromise to what Trump initially proposed. He wanted an outright sale of TikTok to an American company but it didn't materialize with Chinese authorities' export-control list. However, a modified version of the deal was given green light by the U.S. regulators.
Under the agreement, TikTok would become a global company with its headquarter in the U.S. and Oracle will host the user data in its cloud and review the app's security code. While ByteDance will continue to be TikTok's majority shareholder Oracle will be considered TikTok's trusted technology provider in the U.S. with up to 20 percent pre-IPO shares.
Oracle CEO Safra Catz said that the company was "hundred percent confident in our ability to deliver a highly secure environment to TikTok and ensure data privacy to TikTok's American users."
As for TikTok, its Interim Head, Vanessa Pappas, said that the company had reached an agreement that resolved the U.S. Administration's concerns although it "strongly disagreed with the implications of national security threat."
"We're pleased that today we've confirmed a proposal that resolves the Administration's security concerns and settles questions around TikTok's future in the US. Our plan is extensive and consistent with previous CFIUS resolutions, including working with Oracle, who will be our trusted cloud and technology provider responsible for fully securing our users' data," Pappas said in a statement.
Walmart Part of The Deal Too
Under the agreement, a new company will be formed in Texas and it will also see e-Commerce giant Walmart joining the deal. Walmart said that it was interested in a 7.5 percent stake in the new company with its CEO Doug McMillon getting a seat on TikTok's five-member board. That means both Oracle (12.5 percent) and Walmart combined will get 20 percent shares of the company following the global pre-IPO financing round if they shell out $12 billion.
Walmart said in a statement that it would "enter into commercial agreements to provide our e-commerce, fulfillment, payments and other omnichannel services to TikTok Global."
However, the U.S. Government would have to approve all the five members of TikTok's board with one being an expert in data security, NBC News reported. That member will chair a security committee consisting of U.S. citizens approved by the Government. The new company will file for IPO in 12 months and would get listed on the U.S. Stock Exchange.
While Trump has approved the "deal in concept" that would "create 25,000 jobs in the U.S." it will still need Beijing to sign off. TikTok's artificial intelligence algorithm allows content recommendation to users and that falls under China's updated technology export-control list.
For now, TikTok will not be barred from the app stores in America. Commerce Secretary Wilbur Ross has extended the deadline for the app store ban to September 27 midnight as all parties wrap up the final details of the agreement.
"I have given the deal my blessing. If they get it done, that's great. If they don't, that's okay, too. You have the combination of the Walmart, that's obvious, and the high tech of Oracle, and the genius of the two leaders of those companies, okay?" Trump told reporters.
