The new company, dubbed TikTok Global, will have a majority of American directors, Reuters reports.
An IPO of TikTok would be one of the technology sector's biggest-ever stock market debuts
China's ByteDance is planning a US initial public offering of TikTok Global, the new company that will operate the popular short video app, should its proposed deal be cleared by the US government, people familiar with the matter said on Thursday.
ByteDance is racing to clinch an agreement with the White House that will stave off a US ban on TikTok that President Donald Trump has threatened could happen as early as next week.
Trump ordered ByteDance last month to divest TikTok amid US concerns that the personal data of as many as 100 million Americans who use the app could be passed on to China's Communist Party government.
On Wednesday, he reiterated he was opposed to ByteDance retaining majority ownership of TikTok.
The White House and ByteDance have agreed to a term sheet on some aspects of a deal, although Trump has not yet approved it, one of the sources said. Top ByteDance US investors, Oracle and potentially Walmart would hold at least a 60 percent stake in TikTok's US operations, the source said.
White House Chief of Staff Mark Meadows said the situation was still fluid.
"There's no definite proposal that the president's being asked to consider or reject at this point," Meadows told reporters.
The new company, dubbed TikTok Global, will have a majority of American directors, a US chief executive and a security expert on the board, the source added. Oracle has agreed to eventually own a 20 percent stake in the company, according to the source. If Walmart also successfully negotiates acquiring a stake, its CEO, Doug McMillon, would get a seat on TikTok Global's board, the source said.
Trump said that his administration talked with Walmart and Oracle on Thursday but "nothing much has changed" regarding a deal.
He added, without giving details, "I guess Microsoft is still involved." Microsoft said on Sunday its offer for TikTok was rejected. Microsoft did not immediately respond to a request for comment on Thursday.
"We'll make a decision soon," Trump said.
An IPO of TikTok would be one of the technology sector's biggest-ever stock market debuts, given that the app was recently valued by ByteDance investors at more than $50 billion (roughly Rs. 3,68,129 crores). It would further reduce ByteDance's stake in the company to appease US officials who want to see the Chinese firm loosen its grip on the video app.
The filing of the IPO would be on a US stock exchange and could come in about a year, the sources said.
There is no certainty over whether Trump will sign off on the agreement. It was also not immediately clear what assets TikTok Global would own beyond the app's assets in the United States. ByteDance has offered to create 25,000 new US jobs with TikTok headquartered in the United States as it seeks to win Trump's blessing for a deal, Reuters has reported.
It was also not clear whether ByteDance could present the deal to China as keeping majority ownership of TikTok. Chinese officials have said they do not want ByteDance to agree to a forced sale, and the company's proposal to the White House this week called for it to retain majority ownership of TikTok.
The board of TikTok Global would include a national security director, who will be approved by the US and chair a security committee overseeing the protection of user data, according to a person familiar with the matter.
The term sheet will grant Oracle the right to inspect TikTok's source code and includes numerous provisions to ensure data security and requirement that all US users data remains in the United States housed by Oracle, the source said.
It is not clear what Oracle or Walmart will pay for a stake. Oracle, Walmart and Treasury did not immediately comment.
Meadows said on Thursday that the administration is still looking at details of the deal and whether it meets national security thresholds. Meadows said if TikTok remains predominantly Chinese-run under the Oracle deal, that would not meet Trump's objectives.
ByteDance said on Thursday it would need China to approve the proposed deal with the White House, indicating how its bid to stave off a ban in the United States could be further complicated.
As many as 40 percent of Americans back Trump's threat to ban TikTok if it is not sold to a US buyer, a Reuters/Ipsos national poll found last month. Among Republicans, Trump's party, 69 percent said they supported the order, though only 32 percent expressed familiarity with the app.
The White House has stepped up efforts to purge what it deems "untrusted" Chinese apps from US digital networks. Beyond TikTok, Trump has also issued an order prohibiting transactions with Tencent's messenger app WeChat.
Earlier this year, Chinese gaming company Beijing Kunlun sold gay dating app Grindr, bought in 2016, for $620 million (roughly Rs. 4,565 crores) after CFIUS ordered its divestment.
ByteDance acquired Shanghai-based video app Musical.ly, whose user base was largely American, for $1 billion (roughly Rs. 7,477 crores) in 2017 without seeking CFIUS approval, relaunching it as TikTok the following year. Reuters reported last year that CFIUS was investigating TikTok.
© Thomson Reuters 2020
Is Android One holding back Nokia smartphones in India? We discussed this on Orbital, our weekly technology podcast, which you can subscribe to via Apple Podcasts, Google Podcasts, or RSS, download the episode, or just hit the play button below.
For the latest tech news and reviews, follow Gadgets 360 on X, Facebook, WhatsApp, Threads and Google News. For the latest videos on gadgets and tech, subscribe to our YouTube channel. If you want to know everything about top influencers, follow our in-house Who'sThat360 on Instagram and YouTube.