Twitter, TikTok Have Held Preliminary Talks About Possible Combination--Update
By Georgia Wells and Cara Lombardo
Twitter Inc. has had preliminary talks about a potential
combination with TikTok, the popular video-sharing app that the
Trump administration has declared a national-security threat due to
its Chinese ownership, according to people familiar with the
It is unclear whether Twitter will pursue a deal with TikTok,
which would face significant challenges. A deal would involve
TikTok's U.S. operations, the people said.
Microsoft Corp. has been negotiating for weeks with TikTok's
owner, Beijing-based ByteDance Ltd., and is considered the
front-runner for any possible deal, according to the people.
Twitter is seen as a long-shot bidder, given that it is much
smaller than Microsoft and would have a harder time paying for the
deal -- and the software giant is further advanced in
Microsoft said on Aug. 2 that it was pursuing a deal, and that
CEO Satya Nadella had discussed the issue with President Trump.
Microsoft said it was negotiating for TikTok's operations in the
U.S., Australia, Canada and New Zealand.
President Trump has said that TikTok must find a buyer for its
U.S. operations by Sept. 15 or face a ban. On Thursday, the White
House issued an executive order that would bar people in the U.S.
from transactions with ByteDance.
It is not clear what the valuation of TikTok's U.S. operations
would be, but estimates run into the tens of billions of dollars,
which raises questions about how Twitter would finance any deal.
Twitter's market capitalization is about $29 billion and
Microsoft's is more than $1.6 trillion.
Because it is much smaller, Twitter has reasoned that it would
be unlikely to face the same level of antitrust scrutiny as
Microsoft or other potential bidders, said people familiar with the
Twitter would almost certainly need help from other investors if
it does buy TikTok. The company has far less financial firepower
than other major tech players, though it does have high-powered
investors such as private-equity firm Silver Lake. Twitter started
making a consistent profit in the past couple of years, but
reported a $1.23 billion loss in the latest quarter. Twitter
reported $7.8 billion in cash and short-term investments as of
June, compared with more than $136 billion for Microsoft.
If a deal does ultimately come together, it would reshape
Twitter. Although Twitter allows users to upload videos, the app's
focus is on short messages of text and images.
Mr. Trump is Twitter's most high-profile user, but he has lately
criticized the company for labeling or restricting some of his
posts that it says violate its policies. Such moves have fueled the
president's claim that Silicon Valley tech firms are biased against
Mr. Trump's statements against TikTok have caused concern among
potential buyers. Microsoft and ByteDance have been discussing a
potential deal for weeks, The Wall Street Journal has reported. But
when Mr. Trump told reporters aboard Air Force One on July 31 that
he planned to ban TikTok, the companies were caught off guard and
paused their discussions until they had more clarity about Mr.
Trump's plans, the Journal has reported.
Mr. Trump has also said that the U.S. government should receive
a "very big proportion" of the sale price, a condition that will
further complicate negotiations. It has also stoked public anger in
Unlike Microsoft, Twitter does not operate in China. China
blocked access to Twitter in 2009.
For Twitter, a deal could help jumpstart a social-media company
that has struggled to find its footing despite widespread use of
its main platform. Activist investor Elliott Management Corp.
earlier this year pushed Twitter to make changes, including naming
additional board members and a full-time CEO since Chief Executive
Jack Dorsey splits his time between Twitter and Square Inc., where
he is also CEO. Twitter added board members, but kept Mr. Dorsey on
as part-time CEO.
Pursuing TikTok would be somewhat of an about-face for Twitter
on video-sharing apps. The company shut down Vine, an app that let
users share short, looping videos, in 2016 as a part of a
Write to Georgia Wells at Georgia.Wells@wsj.com and Cara
Lombardo at firstname.lastname@example.org
(END) Dow Jones Newswires
August 08, 2020 19:34 ET (23:34 GMT)
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