On Saturday (19 September), US president Donald Trump announced that he agreed to a proposed deal between TikTok, Oracle and Walmart, which was quickly put together to ensure that the ByteDance-owned social media company could continue operating in the US.
TikTok’s future in the US was under threat, after Trump signed an executive order against TikTok and WeChat, stating that the apps were to be banned in the US unless they were sold by their Chinese parent companies. Trump claimed that the step was necessary to deal with the “national emergency” posed by the two apps.
In response to the proposed deal between TikTok, Oracle and Walmart, on Saturday Trump told reporters outside of 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.”
The winning deal
The deal in concept involved Oracle taking a 12.5pc stake in TikTok, while becoming the video-sharing platform’s cloud provider in the US.
Walmart also tentatively agreed to purchase a 7.5pc stake, which involved its CEO Doug McMillon joining the board of the newly created company.
A source told CNBC that ByteDance will own the remaining 80pc of TikTok. The publication pointed out that because 40pc of ByteDance is owned by US venture capital firms, TikTok is technically majority-owned by parties in the US.
In a statement, TikTok said that it is “pleased” that the proposal will resolve security concerns and settle questions around the video-sharing app’s future in the US.
The company said: “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. 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 stake from Walmart and Oracle, which would value the company at $60bn.
A fund for education
Oracle and Walmart released a joint statement, in which the companies said that the global TikTok business will pay more than $5bn in new taxes to the US Treasury Department as a result of the deal. The companies also said that they would work with TikTok 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. He said: “We’re going to be setting up a very large fund for the education of American youth and that’ll be great. That’s the contribution I’ve been asking for.”
According to Reuters, on Sunday ByteDance said 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.
According to the South China Morning Post, it is unclear if the $5bn fund Trump mentioned was related to Oracle and Walmart’s statement about tax.
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.”
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