TikTok Possibly Separate from China-based ByteDance to Avoid US Ban

VIVA – TikTok officials are discussing the possibility of separating the company from ByteDance, it's China-based parent company to help address concerns about national security risks.

The divestment, which could result in a sale or initial public offering, is considered a last resort that should be undertaken only if the company's existing proposal with national security officials is not approved, according to a person familiar with the matter, who declined to be named discussing non-public information. Even so, the Chinese government must approve such transactions.

TikTok's business in the United States could be worth US$40 billion to US$50 billion based on social media multiples and other factors, according to Bloomberg Intelligence analysts Mandeep Singh and Damian Reimertz.

Moreover, TikTok is under scrutiny for its Chinese ownership, which US officials fear could lead to Chinese manipulation or spying on Americans.

The company, which underwent a national security review by the Committee on Foreign Investment in the United States, agreed last year to implement several changes in a plan called the Texas Project. The proposal included bringing in American tech giant Oracle Corp to store US user data and review its software, as well as appointing a three-person oversight board approved by the government.

But Cfius, a panel of agencies involved in national security, stalled in its review process, leaving TikTok unsure whether the platform would continue to operate in the US.

Committee members from the Department of Justice were unwilling to accept TikTok's proposal, according to another person familiar with the matter.

"Neither the ban on TikTok nor TikTok's divestiture from ByteDance, will address national security concerns regarding data transfers," said Brooke Oberwetter, a TikTok spokesperson.

Oberwetter also said under the Texas Project, TikTok's data for users in the United States will be held to a much higher standard of security than other American companies in the same class.