ByteDance, the Chinese parent company for TikTok, has finalised a deal to put the App's US operations into a new majority American-owned joint venture, thus avoiding a nationwide TikTok ban that could have affected over 200 million Americans.
The new joint venture will operate as TikTok USDS Joint Venture LLC and provide enhanced data privacy and cybersecurity protections for US user data, applications and TikTok's powerful recommendation algorithm.
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TikTok hopes to use this agreement to resolve the dispute that began in August 2020 when US President Donald Trump attempted to ban the App due to concerns about national security related to foreign influence and access to data.
Donald Trump hails deal
Trump praised the deal on Truth Social saying TikTok "will now be owned by a group of Great American Patriots and Investors, the Biggest in the World".
He thanked Chinese President Xi Jinping "for working with us and, ultimately, approving the Deal. He could have gone the other way, but didn't, and is appreciated for his decision".
Who are the investors?
The investors in the venture include Dell Family Office, the investment firm of Dell Technologies founder Michael Dell, along with Vastmere Strategic Investments, Alpha Wave Partners, Revolution, Merritt Way, Via Nova, Virgo LI and NJJ Capital.
Former TikTok USDS executives Adam Presser and Will Farrell were appointed as chief executive officer and chief security officer, respectively. TikTok CEO Shou Chew was also named to the venture's board. He oversees the company's global business operations and strategy.
What's the deal?
The proposed agreement provided that American and international investors would collectively control 80.1 per cent of the new entity while ByteDance would continue to own a 19.9 per cent equity interest in the new partnership.
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By virtue of this arrangement, each of the three managing investors, which include Oracle (cloud firm), Silver Lake (a private equity group) and MGX (an investment company based in Abu Dhabi) will own only 15 per cent of the new entity on an equal basis.
TikTok stated that the joint venture will be used to train, test and update the recommendation algorithm on the basis of US customer data and that the algorithm will be housed on Oracle's US-based Cloud Services.
Reuters said in its report that a White House official told the news agency that the US and Chinese governments had signed off on the deal. The Chinese Embassy in Washington did not immediately comment.
Critics argue
Critics argue that the arrangement does not fully follow the US national security law passed in 2024 under the Biden administration that required a spinoff. It is also unclear if any of these critics will challenge the deal.
This law states that ByteDance cannot have any operational connection with US TikTok. TikTok claims its joint venture has been set up according to Trump’s executive order from September.
The deal put forward by the White House allows ByteDance to lease a copy of its content algorithm to the new US TikTok entity. The new algorithm will be retrained using US user data. ByteDance is also expected to keep control over important parts of its US TikTok business, including its advertising division and the rapidly growing e-commerce arm, TikTok Shop.
