President Donald Trump approved a deal for Oracle and Walmart to acquire stakes in the US operations of popular video app TikTok, postponing a potential ban that was scheduled to go into effect on Sunday.
Oracle will take a 12.5% stake in a new company, TikTok Global, while Walmart will have 7.5%. The company will be headquartered in the US and provide service to American users and most users in "the rest of the world." Four of the company's five board members will be American. Oracle will provide secure cloud services that satisfy national security concerns about the Chinese-owned app.
"Both companies will take part in a TikTok Global pre-IPO financing round in which they can take up to a 20% cumulative stake in the company," TikTok said in a statement. "We will also maintain and expand TikTok Global's headquarters in the US, while bringing 25,000 jobs across the country."
Oracle and Walmart confirmed the deal in separate statements. Walmart's statement said the initial public offering of TikTok Global would take place "in less than 12 months" and that the company will be listed on a US exchange. The partners have also pledged to develop an online educational initiative.
The deal, which still requires the approval of the Chinese government, came just hours before a ban on new downloads of TIkTok was set to take place. Commerce Secretary Wilbur Ross said Saturday that the ban would be pushed out to Sept. 27 at 11:59 p.m.
The agreement follows a tumultuous period for TikTok, which Trump has called a national security threat because it's owned by ByteDance, a Chinese tech company. The administration alleges that the Chinese government could use data gathered by the TikTok app to "track the locations of Federal employees and contractors, build dossiers of personal information for blackmail, and conduct corporate espionage." TikTok has repeatedly pushed back, noting that it wouldn't turn over data to the Chinese government even if it were asked to.
The administration issued two executive orders concerning TikTok. An Aug. 6 order would have barred any US transactions with ByteDance and was set to go into effect on Sunday. A separate executive order, issued Aug. 14, ordered ByteDance to sell its US operations by Nov. 12.
Intelligence agencies have determined that Chinese authorities could collect data through TikTok, though there's no evidence they've done so, according to The New York Times. The Wall Street Journal found that the TikTok app for Android surreptitiously collected device identifiers known as MAC addresses. The practice ended in November.
On his way to a campaign rally in North Carolina, Trump told reporters that he had given the TikTok-Oracle deal "my blessing," Bloomberg reported. The news service reported that Oracle will have "full access" to TikTok's source code and updates it can review to ensure no back doors exist. Chinese officials have indicated the government is willing to approve an agreement as long as ByteDance doesn't have to give up the artificial intelligence algorithms behind the app, Bloomberg said.
Trump's high-profile attacks on TikTok and ByteDance have already taken their toll on the app, which has an estimated 100 million users in the US. TikTok CEO Kevin Mayer, a former Disney executive, resigned in late August after just three months in the position. He told employees in a letter that the role he signed up for looks different because of the US administration's pressure on ByteDance to sell its US business. Vanessa Pappas, TikTok's US general manager, is the interim head of TikTok.
Two lawsuits have been filed over Trump's executive orders. On Aug. 24, TikTok and ByteDance sued Trump and Ross, alleging the administration had violated the due process clause of the Fifth Amendment because the company wasn't given a chance to be heard. The lawsuit also alleges the president acted beyond his legal authority because his administration hasn't proved that TikTok poses a national security threat. The president's order furthers Trump's "campaign of anti-China rhetoric in the run-up to the US election," the lawsuit says. It's unclear what will happen with the lawsuit now that a deal has been approved.The White House didn't immediately respond to a request for comment.
In a separate lawsuit filed on the same day, Patrick Ryan, a TikTok employee, alleged the administration's actions could prevent the company's 1,500 US workers from being paid. The Department of Justice later said.
The US isn't the only country that's targeted TikTok and Chinese apps. India banned TikTok, along with WeChat and dozens of other Chinese apps in late June, citing national security concerns. The ban came after 20 Indian soldiers were killed during a clash with Chinese troops along a disputed Himalayan border.
TikTok is known for its quirky videos of people lip-syncing and dancing, in clips that run between 15 seconds and 1 minute. But it's also become a hub for political talk ahead of the US presidential election. The app has logged more than 2 billion downloads as of April. TikTok had 689 million monthly active users globally as of July and was available in more than 200 countries. Uncertainty over TikTok's future prompted some US users to direct their fans to their Instagram and YouTube accounts. Facebook, which is notorious for copying its rivals, released a TikTok competitor called Reels on Instagram in early August.
ByteDance purchased Musical.ly for around $1 billion in 2017 and that app, popular among US teens, was rebranded as TikTok.
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