The challenge of successfully selling TikTok is a complex and daunting task. The recent decision by the U.S. House of Representatives to ban TikTok if it does not sell itself has put the future of the popular social media app in jeopardy. However, selling TikTok is not as simple as it may seem.
Firstly, a sale would require approval from the Chinese Communist Party (CCP), which is unlikely to agree to sell TikTok and its source code. CCP leader Xi Jinping has shown a strong desire for control and dominance in the tech industry, making it unlikely that China would willingly sell TikTok.
Furthermore, Beijing’s recent attitude suggests that the financial interests of TikTok’s shareholders are not a priority for the CCP. They have portrayed the U.S. government as an enemy of Chinese innovation and a foreign looter of Chinese assets. This indicates that negotiations for divestment would be challenging.
Assuming China comes to the negotiating table in good faith, a sale would still not be straightforward. ByteDance, TikTok’s parent company, has a valuation of $220 billion, making a carveout of TikTok’s U.S. operations costly for any buyer. The Financial Times estimates TikTok’s U.S.-generated revenues at around $16 billion per year, which puts its valuation at roughly $110 billion using a simple valuation model.
Potential buyers include Fortune 500 giants Walmart and Oracle, as well as other prominent investors like Bobby Kotick and Kevin O’Leary. However, agreeing on valuation is a major challenge. O’Leary highlighted the problem of acquiring TikTok without access to its proprietary algorithms and source code, which reside in China and are crucial for the CCP’s influence and monitoring of international users.
As a result, any potential buyer would only receive a shell of TikTok without its valuable algorithms and source code. This significantly reduces its worth and makes it unlikely to be worth hundreds of billions of dollars. O’Leary suggested a starting bid of $20 billion to $30 billion, which is a significant decrease from ByteDance’s last funding round.
Moreover, the TikTok bill imposes a six-month deadline for ByteDance to divest TikTok’s U.S. operations, which is a challenging timeframe to meet considering the complexities of negotiating a sale.
In conclusion, the challenge of successfully selling TikTok is multifaceted and riddled with obstacles. The geopolitical tensions between the U.S. and China, the CCP’s reluctance to sell TikTok, the high valuation, and the lack of access to proprietary algorithms and source code make a sale unlikely. The future of TikTok remains uncertain as it navigates through these challenges.
