Microsoft is in talks with ByteDance about acquiring the U.S. business of popular video app TikTok, according to people familiar with the matter. Meanwhile, U.S. President Donald Trump is weighing tough action against the company, including forcing parent company Byte Dance to sell it.
People familiar with the matter said the sale of TikTok’s US business to Microsoft for tens of billions of dollars would be a “victory” for TikTok and Byte Dance, whose executives had feared the U.S. government would force equipment makers to remove TikTok from their app stores.
Meanwhile, the Committee on Foreign Investment in the United States (CFIUS) is reviewing Byte Dance’s 2017 acquisition of Music.ly, which eventually evolved into what is now TikTok. The committee has decided to order Byte Dance to divest TikTok, and the government is negotiating the terms of the divestiture, according to people familiar with the matter. White House officials have said TikTok could pose a threat to national security.
On Friday, CFIUS Chairman Steven T. Mnuchin briefed President Trump on the divestiture plan, but it was unclear what action the president would take, including whether the U.S. would impose a divestiture order on all of TikTok’s U.S. operations, and whether its actions would also affect TikTok’s global operations.
Mr. Trump is weighing several other action plans, including signing an executive order that would use the power of the International Emergency Economic Powers Act to ban certain foreign apps from entering the U.S. App Store. The Trump administration is also considering whether to add TikTok’s parent company to the so-called “entity list,” which would prevent it from buying U.S. products and services without a special license, people familiar with the matter said. Discussions are expected to continue until the end of the week.
In Friday’s comments, Mr. Trump said the United States had “several options” for dealing with TikTok, including a ban. But he added: “A lot of things are happening, so we’ll see.” But we are considering a number of alternatives to dealing with TikTok. “
It’s unclear how deep TikTok’s negotiations with Microsoft and others to sell its U.S. business are, but the change in ownership is critical to the app. The United States is one of TikTok’s major markets and continued operations in the country are a priority.
TikTok also discussed other scenarios to allay U.S. officials’ concerns. In one case, non-Chinese investors such as Sequoia Capital, SoftBank and General Atlantic could buy a majority stake in the app from Byte Dance, people familiar with the matter said.
However, any deal can be expensive. ByteDance’s valuation was recently about $100 billion, according to PitchBook, a research firm. In the first quarter of this year, about 315 million users downloaded TikTok, the largest single-quarter app download ever, bringing its total global download to more than 2.2 billion, according to Sensor Tower.
In a statement, TikTok did not respond to Trump’s comments or any deal negotiations. A spokeswoman said the app was confident of its long-term success and was committed to protecting the privacy and security of creators so they could “bring joy to their families.”
Microsoft declined to comment. Earlier, media reported discussions between Microsoft and TikTok.
These developments reflect the increasing pressure on TikTok. “It is recognized that applications that have accurate access to user data, locations and other sensitive personal data are of particular concern to CFIUS and may raise significant national security concerns,” said John P. Kabaello, a lawyer who represented the company in the CFIUS review. “
Security experts say TikTok typically collects data from mobile phones in amounts similar to other social media applications. But Christoph Hebeisen, head of security intelligence research at Lookout, a mobile device security firm, said U.S. officials were concerned about ownership of the app.
TikTok is used by more than 800 million people worldwide and is particularly popular with young people. Users can easily add music and other audio tracks to their videos, which are usually quickly spread on Facebook and Twitter. As the app becomes more popular, TikTok’s Chinese workforce has grown to thousands. The company also has operations in the United States, with offices in New York and Los Angeles.
In response to more scrutiny in the Us, TikTok hired Disney executive Kevin Mayer as chief executive in May. The app also promises to publicly disclose the algorithms that drive its application.
In addition, TikTok has stepped up its lobbying activities in the United States. With the help of well-known investors such as SoftBank and General Atlantic, it has hired former heads of the Internet Association and staff from prominent members of Congress. The company has signed up more than 35 lobbyists, including David J. Urban, a classmate of Secretary mike Pompeo’s West Point and an ally of Mr. Trump.
On Wednesday, as the chief executives of Amazon, Apple, Facebook and Google testified before Congress about their market power, Mayer defended TikTok and promised the U.S. government that it would do the right thing. “It is only natural that the whole industry has been censored,” he said in a statement. However, due to our Chinese heritage, we have come under more scrutiny. We believe it is critical that users, advertisers, creators, and regulators demonstrate that we are responsible and committed members of the American community that comply with U.S. law. “
CFIUS has previously ordered companies to divest acquired assets. The U.S. Congress expanded the commission’s terms of reference in 2018 to include transactions involving “sensitive user data” in its review. The reason for the change is concern that the data collected by foreign-owned applications and websites could threaten national security.