Big appeal and big question marks in a possible TikTok sale

TikTok is one of the most popular and largest social media apps in the world, with great brand recognition and loyal users.

It may also be one of the hardest to sell.

That's the dilemma TikTok faces as lawmakers in Washington push a bill that would force the app's Chinese parent company, ByteDance, to sell it or face a ban in the United States. The bill passed the House on Wednesday but could face an uphill climb in the Senate.

Rumors are already circulating on Wall Street about who might be interested in buying TikTok. The rumors intensified Thursday after Steven Mnuchin, former Treasury Secretary, told CNBC that he was “trying to put together a group to buy TikTok because they should be owned by American companies.” Mr. Mnuchin said he had spoken to a “group of American investors” about such a deal.

But any potential buyer could face several obstacles. The Chinese government could block the sale. The US president, according to the bill passed by the House, should affirm that an agreement excludes the application of ByteDance.

And then there's the price – almost certainly high. Research firm CB Insights recently estimated that ByteDance was worth $225 billion, although the cost of the US version of TikTok alone is less clear.

The price would limit the pool of potential buyers to a coalition of private equity firms; a corporate giant, like Microsoft; or a combination of both. But it's unclear whether antitrust regulators would allow a big company like Microsoft — or Alphabet, which owns YouTube — to buy the app.

A spokesperson for the Federal Trade Commission declined to comment. The Justice Department declined to comment.

The last time TikTok was up for sale, ByteDance talked to Microsoft about a potential deal before selecting Oracle, the cloud computing company. Oracle brought in Walmart as a partner, but while the two appeared ready to buy a stake in the app, the deal collapsed under geopolitical pressure.

Oracle did not respond to a request for comment. Microsoft, which also considered purchasing the app in 2020, declined to comment.

TikTok said the legislation was unnecessary because the app does not pose a risk to Americans' data or distort its feed to suit the whims of the Chinese government. He proposed a plan that would store U.S. user data on domestic servers controlled by Oracle.

Beijing could apply additional government control. This week, Wang Wenbin, spokesperson for the Chinese Ministry of Foreign Affairs, sentenced Efforts by U.S. lawmakers to force the sale or ban of Tic Tacalthough he stopped short of saying the country would prevent such a move outright.

Analysts doubt whether the Chinese government would allow such a move.

“You're telling me that China is going to sell this incredible company to an American company, just so they can enjoy the profitability and give up all the geopolitical benefits of their ban? said Rich Greenfield, an analyst at LightShed Partners.

It is unclear how advanced Mr. Mnuchin's discussions with investors are and whether participants have taken formal steps necessary to pursue a possible transaction, such as hiring a financial advisor or establishing a formal approach with ByteDance. A spokesperson for Mr. Mnuchin declined to comment.

Mr. Mnuchin has a long history with TikTok. As Treasury Secretary from February 2017 to January 2021, he led the Committee on Foreign Investment in the United States, a group of federal agencies that monitor international involvement in American businesses. CFIUS was behind the government's efforts to get ByteDance to sell its TikTok business in 2020.

Mr. Mnuchin, a former partner at Goldman Sachs, now runs a private equity firm, Liberty Strategic Capital. It is one of several private equity firms facing a slowdown in deals, amid growing regulatory pressure and rising interest rates. The company recently invested $450 million in buy the beleaguered New York Community Bank.

For TikTok's U.S. investors, including Susquehanna Investment Group and General Atlantic, a sale would certainly be preferable to a ban. These investors could choose to transfer their stake in ByteDance to any new owner. General Atlantic declined to comment, and a representative for Susquehanna did not respond to a request for comment.

“I have to think that most private investors in TikTok, including a number of Americans, would prefer a divestment rather than a ban, because a ban is going to destroy a lot of value given the size and value of the business from TikTok. U.S. user base,” said Peter Harrell, a former national security official in the Biden administration.

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