Last week, we covered the early stages of the Oracle-TikTok partnership, which seemingly came out of nowhere, but there weren’t too many specifics about what exactly this whole “trusted tech partner” status even meant. Now that the ban has been lifted, at least temporarily, we know quite a bit more about what this deal entails.
Flashing back to last week, hot off the news that Microsoft’s comprehensive attempt at a deal had failed, Oracle appeared out of the blue to announce its partnership with the video-sharing application that left many scratching their heads. Over the weekend, President Donald Trump essentially gave his blessing to the deal despite remaining concerns from U.S. officials, and said, “I have given the deal my blessing. If they get it done, that's great. If they don't, that's okay, too.”
Here’s a good explainer on Oracle’s new TikTok ownership structure pic.twitter.com/8hrzK62w2N
— Jack Appleby (@JuiceboxCA) September 21, 2020
Pending this deal’s official approval and ultimate conclusion, which now also incorporates Walmart into the plan, the Department of Commerce issued a one-week extension to this Sunday, and it’s expected that this deadline will be further extended ahead of the weekend. But what do we know so far about the deal, and what does it do to address the underlying concerns of national security issues?
Well, despite the Trump administration’s demands that TikTok be sold to a U.S. buyer in August, what we do know about the deal is that it Oracle did not and is not buying TikTok. As we currently understand, the partnership between the two will see TikTok’s parent company ByteDance spinning off U.S. operations (as well as many other nations) into a newly formed company dubbed “TikTok Global.”
Under the deal, Oracle will host all of TikTok’s U.S. user data, which analysts say will give a significant boon to Oracle’s cloud-computing business. Walmart will also undoubtedly benefit from the deal that provides them with a huge new consumer base of young Americans to reach, as the company also said it plans to implement its e-commerce and retail capabilities to the app. Officials have also stated that more than 25,000 new jobs will come alongside the partnership, which will also pay somewhere around $5 billion in taxes to the Treasury Department.
That massive sum of money, according to Trump, is part of the White House's cut for making the deal possible, and the president wants to use the funds for a patriotic education program that he called the “1776 commission.” During his recent campaign rally in Fayetteville, North Carolina, Trump said, “We will stop the radical indoctrination of our students and restore patriotic education to our schools." Nevertheless, the new U.S. TikTok company will ultimately control the money and how it’s invested.
About the deal, Oracle CEO Safra Catz said, “We are a hundred percent confident in our ability to deliver a highly secure environment to TikTok and ensure data privacy to TikTok's American users, and users throughout the world.”
I’ll keep posting this til someone explains it different pic.twitter.com/26ohwUC9WA
— 𝐁𝐮𝐬𝐢𝐧𝐞𝐬𝐬𝐅𝐚𝐦𝐨𝐮𝐬 📜💰 📈 (@BusinessFamous) September 20, 2020
Oracle is set to hold a 12.5 percent stake in the new TikTok Global (which will be headquartered here), with Walmart holding another 7.5 percent. As for the remaining 80 percent? ByteDance will control that vast majority. However, since about 40 percent of ByteDance itself is owned by U.S. investors, proponents argue that around 53 percent of TikTok Global will be held by investors in the U.S., meaning that it does, indeed, give majority control to American-based owners.
Curiously, ByteDance seems to disagree with this perspective. According to the Wall Street Journal (WSJ), the company stated on Monday that “the current plan does not involve the transfer of any algorithms and technologies,” but that “Oracle has the authority to check the source code of TikTok USA for security.”
Aside from ByteDance, Chinese officials who will also need to approve the deal aren’t saying much in the way of approval. For one, there’s the massive obstacle of China’s newly implemented export ban, which, also according to the WSJ, prevents the outright sale of TikTok’s assets to the U.S. While it does permit an investment (similar to the current Oracle deal), Hu Xijin, editor-in-chief of the Chinese-affiliated Global Times, said on Twitter earlier this week that “Based on what I know, Beijing won't approve current agreement between ByteDance, TikTok's parent company, and Oracle, Walmart, because the agreement would endanger China's national security, interests and dignity.”
Based on what I know, Beijing won't approve current agreement between ByteDance, TikTok's parent company, and Oracle, Walmart, because the agreement would endanger China's national security, interests and dignity.
— Hu Xijin 胡锡进 (@HuXijin_GT) September 21, 2020
Additionally, U.S. officials from the Committee on Foreign Investment will also need to sign off before the deal is approved here. This is explicitly stated in Trump’s executive order from mid-August, which requires the Committee to supervise the divestment of ByteDance's operations in the U.S. — which currently has a deadline set for November 12th.
All of this conflicting information about the deal, which was originally intended to give the eventual U.S. buyer control over core technologies behind TikTok to dissuade any concerns over national security, hasn’t exactly bolstered confidence in the salvation of the app. To further muddy the waters, Trump stated to Fox News on Monday, “Everything is going to be moved into a cloud done by Oracle, it's all through the cloud. And it's going to be totally controlled by Oracle … and if we find that they don't have total control, then we're not going to approve the deal.”
For now, at least, it seems as if all parties involved are confused about the ultimate terms of the deal, who will actually own this new company and what it means for the estimated 100 million users in the U.S. … not to mention if any of this really addresses the national security concerns that kicked off everything. This pretty much sums up all there is to know that anyone knows about the whole debacle so far, but the story will continue to develop leading up to Sunday’s new deadline.