TikTok and Oracle Spar Over Ownership, Threatening Deal
September 21 2020 - 11:59AM
Dow Jones News
By Georgia Wells and Alex Leary
Disagreement between TikTok and its new U.S. partner spilled
into the open, with dueling messages between Oracle Corp. and the
Chinese-owned video app operator over the planned ownership
structure for the new U.S.-based version of the company.
The squabble raises fresh questions about the fragility of a
deal that President Trump signed off on in principle over the
weekend and seemed to save the popular video-sharing app from
extinction in the U.S.
All sides have agreed that Oracle and Walmart Inc. would take a
combined 20% stake in TikTok Global, the new U.S.-based company
planned as part of an unusual and complicated deal to save the app
from a ban threatened by Mr. Trump over national-security
concerns.
But people involved in the deals have provided differing
accounts over the structure of the remainder, with a spokesman for
ByteDance Ltd., TikTok's Beijing-based owner, on Sunday saying that
ByteDance would directly hold an 80% share of the new TikTok entity
before an IPO.
Early Monday, Oracle issued a statement seeming to contradict
that. "Upon creation of TikTok Global, Oracle/Walmart will make
their investment and the TikTok Global shares will be distributed
to their owners, Americans will be the majority and ByteDance will
have no ownership in TikTok Global," Oracle executive vice
president Ken Glueck said in a statement.
The disagreement over such basic terms of the deal shows the
fluid status of the talks even after Mr. Trump on Saturday said he
had approved the agreement in principle, and threatens to disrupt
the carefully brokered pact, which could also be blocked by the
Chinese government.
Mr. Trump on Monday sided with Oracle.
"They are going to own the controlling interest. Everything is
going to be moved into a cloud done by Oracle...and it's going to
be totally controlled by Oracle," he said on Fox News. "If we find
that they don't have total control, then we're not going to approve
the deal."
Mr. Trump said the new company would provide good competition
for Facebook Inc. and other social-media platforms.
"We will be watching it very closely. On a preliminary basis we
like the fact that these are two great companies," he said of
Oracle and Walmart.
In late July, Mr. Trump said he wanted to see TikTok bought by a
U.S. company or otherwise be banned in the U.S. His administration
has cited national security concerns about how the app could pass
on data about its users to the Chinese government, although TikTok
has said that would not happen.
That set off a scramble to form a new company that would appease
both U.S. and Chinese government demands about how such a deal
could work.
As initially described by people familiar with the deal,
ByteDance would retain roughly 80% ownership of the new company.
But because ByteDance is about 40%-owned by U.S. investors, the new
company with equity stakes for Oracle and Walmart can be described
as having majority American ownership, they said.
According to Oracle, ByteDance wouldn't technically be an owner
of the new TikTok Global entity. Instead, shares in the new entity
would be distributed proportionally to ByteDance's current owners,
which include both Chinese and American investors.
With the addition of Oracle and Walmart taking a combined 20%
equity stake, TikTok Global would be 53%-owned by U.S. companies or
investors, a person familiar with Oracle's thinking said. After an
expected initial public offering the Chinese stake in TikTok could
fall to about 31%, depending on exact details of the size of the
IPO, the person added.
On Sunday, a person familiar with TikTok's thinking disagreed
with this math. That person maintains that ByteDance would directly
hold its shares in TikTok before the IPO.
There were some indications that China was also waffling on its
support for the deal.
Hu Xijin, the editor in chief of the Global Times, a Communist
Party-backed tabloid, wrote on Twitter that Beijing wouldn't
approve the current agreement between ByteDance and Oracle, saying
that "the agreement would endanger China's national security,
interests and dignity." Mr. Hu didn't divulge his source, and
earlier in the day had held up the U.S.'s restructuring of the deal
as a model that should be promoted globally.
Write to Georgia Wells at Georgia.Wells@wsj.com and Alex Leary
at alex.leary@wsj.com
(END) Dow Jones Newswires
September 21, 2020 11:44 ET (15:44 GMT)
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