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)

Copyright (c) 2020 Dow Jones & Company, Inc.
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