I'm honestly tired of talking about the “TikTok deal” and the political theater surrounding it that the industry is calling “news” — however it's outcome is important, so here goes another update.
Two weeks ago I reported that the U.S. and China had struck a framework agreement on transferring TikTok to U.S.-controlled ownership, but that the deal would have to be finalized with President Trump and President Xi.
Then last week I followed up coverage with reports that President Trump had extended the TikTok ban deadline for the fourth time until Dec 16th, and that the deal would include U.S. control of TikTok's algorithm by a consortium of investors including Oracle, Silver Lake, and Andreessen Horowitz (which has now been potentially replaced by MGX, but more on that below).
Following a phone call with President Xi, Trump wrote on Truth Social last Friday that he and Xi “made progress on many very important issues” and specifically thanked Xi for “the TikTok approval.”
So what's happened since?
- On Thursday, President Trump signed an executive order paving the way for a TikTok deal and thanked President Xi for approving the sale.
- Regarding political bias of the new platform, Trump said, “I always like MAGA-related. If I could make it 100% MAGA, I would, but it's not going to work out that way, unfortunately. No, everyone's going to be treated fairly. Every group, every philosophy, every policy will be treated very fairly.”
- It was revealed that Abu Dhabi’s MGX will be part of the investor consortium, which has up until now been touted as “American owned.”
- CNBC later reported that General Atlantic, Susquehanna, and Sequoia are also expected to contribute equity in the new TikTok U.S. entity.
- TikTok U.S. was valued at $14B in the deal, indicating a 1.27x valuation-to-revenue multiple based on TikTok U.S.'s expected revenue of $11B in 2025.
- In comparison, Meta sits at a $1.88 trillion market cap compared to its $164.5B in global revenue last year, or an 11.4x valuation-to-revenue multiple.
- Is it me? Or is TikTok U.S. being seriously undervalued in this deal? Part of the valuation discrepancy lies in that fact that ByteDance would get at least 50% of the American company's profits if the deal goes through, despite the fact that it would only own 20% of the spun-off company, according to Bloomberg reports, and those payments would come via a combination of license fees and profit distributions.
- Experts raised concerns about what the U.S. TikTok deal could mean for News Corp's dominance in Australian media. Should Australia use the Chinese version or the U.S. version? Tom Sulston, head of policy at Digital Rights Watch, said, “The problem is not the ownership. The problem is the constant and intrusive surveillance of the user base. Users of a US-owned TikTok won’t enjoy any more privacy than they did with a Chinese-owned TikTok, on account of the lack of meaningful regulation of social media companies.”
On Sunday, Vice President Vance told FOX News:
“I feel very confident that we have successfully separated this company from TikTok global and actually made it so that we can control people's data security. We can ensure that the algorithm is not being used as a propaganda tool by a foreign government.”
LOL, why did he specify “foreign” government? Anyway…
As of Sunday, ByteDance has not acknowledged Trump's executive order, nor has it confirmed that the transaction is actually taking place.
Unrelated but interesting… I never knew that TikTok's CEO Shou Zi Chew used to work for Mark Zuckerberg as a Facebook intern. Did you?