Trump administration officials have expressed skepticism over a deal that would leave Chinese-based ByteDance with a majority stake in TikTok, saying in order to quell national security concerns over the app American investors should hold a majority share.
In an executive order last month, President Trump gave ByteDance 45 days to sell its U.S. TikTok operations or face a ban over concerns that the data TikTok collects from U.S. consumers could be shared with the Chinese Communist Party. In order to avoid President Trump’s ban, the deal must be settled by Sunday.
A deal presented to the administration for review would have ByteDance partner with the U.S.-based Oracle to form a new company that would take over TikTok operations — but ByteDance would retain a majority ownership stake in the new firm.
Senate Republicans and others say the proposal doesn’t meet the full U.S. acquisition the president was seeking when he issued his executive order, leaving open the door to security concerns over the Chinese government’s potential access to U.S. user data in the future, the Wall Street Journal reported.
When asked about the idea of ByteDance maintaining majority ownership of TikTok, the president said, “Conceptually, I can tell you, I don’t like that.”
Trump said he will be fully briefed on the deal on Thursday and won’t sign off until he receives more information, according to the Journal.
Treasury Secretary Steven Mnuchin and other U.S. officials and investors are seeking a deal that would leave U.S. ownership share of the new company well over 50 percent.
U.S. investors such as venture firms Sequoia Capital and General Atlantic currently own about 40 percent of ByteDance, while the firm’s founder, Zhang Yiming holds just under a quarter and ByteDance employees own 20 percent. About 20 percent is held by other non-U.S. investors.
The new structure proposed by U.S. officials would see all of ByteDance’s assets owned by the new company, in which Oracle and Walmart would become investors as well, leaving U.S. investors with more than 50 percent ownership.
U.S. officials and the American investors want an even larger U.S. stake than that plan has proposed, suggesting that one answer to that problem would be to take the new U.S.-based company public.
It is unclear if the original proposal submitted to national security regulators, which left ByteDance a majority stake, had been amended as part of the review process, the paper reported, though a person familiar with the matter said the current proposal under consideration is one with U.S. investors holding a majority stake.
Under the proposed deal, ByteDance would allow Oracle to review TikTok’s source code and software to check for backdoors that would allow the Chinese government to access the data. Oracle would also regularly check data flows to ensure that data isn’t going anywhere it should not go. Additionally, the U.S. government would need to approve U.S. board members and one board member will be a data expert with national security credentials.
Senate Republicans said they would closely review the deal in a letter Wednesday.
“Any deal between an American company and ByteDance must ensure that TikTok’s U.S. operations, data, and algorithms are entirely outside the control of ByteDance or any Chinese-state directed actors, including any entity that can be compelled by Chinese law to turn over or access U.S. consumer data,” said the letter signed by Senators Marco Rubio (R., Fla.), Thom Tillis (R., N.C.), Roger Wicker (R., Miss.), Rick Scott (R., Fla.), Dan Sullivan (R., Alaska) and John Cornyn (R., Texas).