TikTok has completed a deal with Oracle and two other investors that will allow the popular social video platform to continue its business in the United States.
The deal, which is expected to close on January 22, will be 50% owned by a new consortium of investors that includes tech giant Oracle, Silver Lake and MGX, a technology fund in the United Arab Emirates, which will each own 15%. TikTok's parent company, ByteDance, will own 19.9% of the U.S. joint venture, and subsidiaries of ByteDance's existing investors will own 30.1%, TikTok said in a memo to employees.
“With these agreements in place, our focus must remain where it has always been—firmly on delivering services to our users, creators, businesses, and the global TikTok community,” TikTok CEO Shaw Tzu Chu wrote in the note.
The deal removes a shadow cast over the future of TikTok, which has become one of the most dominant social networks in the world and has a large presence in Culver City.
The company's U.S. business has been uncertain for years due to lawmakers' concerns about the security of ByteDance's ties to China. ByteDance was forced to give up its ownership of the app's US operations or face a nationwide ban after Congress passed a law that took effect effect in January.
President Trump, who led the campaign to ban TikTok in the US years ago, allowed TikTok to continue operating in the country, and in September signed a decree description of the new joint venture.
The entity, which will oversee U.S. data protection, algorithm security, content moderation and software security, will be governed by a seven-member board, most of whom are American, Chu said in his note. Oracle will be the security partner responsible for “auditing and verifying compliance with agreed upon national security conditions,” Chu wrote.
Oracle Executive Chairman Larry Ellison and his family are also leading attempt to buy Warner Bros. Discovery.
Oracle did not respond to a request for comment.
Shares of the Texas cloud services provider jumped on Friday after a period of investor concern about the artificial intelligence market. Oracle's stock price closed Friday at $191.97, up 7%.
Silver Lake declined to comment. The White House on Thursday referred questions about the deal back to TikTok. In September, Trump said Chinese President Xi Jinping had approved the deal.
“These guarantees will protect the American people from misuse of their data and influence by a foreign adversary, and will allow the millions of American viewers, creators and businesses that rely on the TikTok app to continue to use it,” Trump said in his order.
The announcement will also come as a relief to creators and businesses that rely on TikTok to entertain and reach fans and customers.
“I hope he stays true to the platform and the independence we get from it,” said Yasmin Saheed, who posts comedy videos on TikTok and has 2.4 million followers. “I hope we can still monetize our videos in the same way because without it, I think a lot of people would quit or feel uninspired.”
Many TikTok creators live in Southern California, close to TikTok's Culver City office. Over the years, when TikTok's future seemed uncertain, some of these creators diversified their activities by posting their content to other platforms such as YouTube and Instagram.
“It's a smart way to avoid ownership and data issues,” Ray Wang, principal analyst at Constellation Research, said of the deal.
If completed, the deal would resolve a lingering problem in Beijing-Washington relations and signal progress in broader negotiations. But it would also deprive China's most valuable private company of complete control over the American social media phenomenon.
ByteDance's coveted algorithms are considered central to TikTok's business. According to Bloomberg, under the deal proposed by Washington, ByteDance will license its artificial intelligence recommendation technology to newly created US venture TikTok, which will use the algorithm to retrain a new system protected by Oracle. According to TikTok, the algorithm will be retrained on US user data by a US joint venture.
Some industry observers question whether the deal addresses larger problems with TikTok in legislation passed by Congress.
“While these executive orders have positively allowed the platform to operate and maintain a performance platform, they do not address underlying concerns about the law, which may apply to other platforms in the future, and raise questions about executive power.” Jennifer Huddleston
This was stated in a statement by a senior fellow for technology policy at the Cato Institute.
“Just because TikTok remains accessible under such orders does not mean that political concerns about the underlying law have been resolved,” she wrote.
Bloomberg contributed to this report.
