US to control TikTok Global board as China keeps majority ownership

REUTERS/Danish Siddiqui

An envisioned new company consisting of the U.S. operations of the popular TikTok video app would be majority-owned by Chinese parent ByteDance Ltd.but controlled by a board of American executives from the likes of Sequoia Capital and Walmart Inc., a source with knowledge of the situation told Caixin.

The deal, which has received a tentative nod from U.S. President Donald Trump, would see ByteDance bring in U.S. software giant Oracle Corp. and retailing powerhouse Walmart Inc. as minority equity partners for the new company called TikTok Global, valuing it at more than $60 billion, the source told Caixin, speaking on condition of anonymity.

The arrangement that would see the new company’s majority equity controlled by a Chinese owner while management control rested in the hands of U.S. executives is similar to a reverse situation used by most Chinese companies that list in the U.S. Such arrangements allow for diversified ownership of companies from sensitive sectors, while keeping management control squarely in the hands of local executives.

The proposed new TikTok Global board, which would consist of four Americans and one Chinese, could be a factor that helped to convince the administration of U.S. President Donald Trump that Americans would remain in control of the app’s U.S. operations that contain huge pools of data on its millions of American users.

Under that arrangement, the sole Chinese citizen on the TikTok Global’s five-member board would be Zhang Yiming, founder of ByteDance, China’s largest unlisted internet company, the source told Caixin. TikTok is the global version of ByteDance’s Douyin, which enjoys similarly high popularity in its home China market.

The board’s other four members would consist of Arthur Dantchik, president and founder at Sig Asia Investment LLLP and also a member of ByteDance’s board; William E. Ford, CEO of General Atlantic and also a member of the ByteDance board; Walmart CEO Doug McMillon; and an executive from the American operations of venture capital giant Sequoia Capital. Oracle would have no direct representation on the board.

The issue of who ultimately controls of TikTok’s U.S. operations lies at the center of the Trump administration’s concerns about the company. ByteDance had insisted that TikTok is based outside of China and thus outside of Beijing’s control. It went so far as to name American entertainment industry veteran Kevin Mayer as TikTok’s global CEO, though Mayer abruptly resigned from the post late last month, citing a “sharply changed” political environment.

Despite ByteDance’s arguments that TikTok was an American company, Trump’s administration continued to insist that TikTok’s American operations be sold or risk being forcibly shut down. India, one of TikTok’s other major markets, formally banned the popular app back in July over similar privacy protection concerns.

Talks had initially focused on a straightforward sale to a partnership led by software giant Microsoft Corp. and Walmart, until the former made a surprise announcement last week thatit had been rejected. That left the door open for Oracle, which paired up with Walmart to put together a deal that would let ByteDance remain majority owner while putting control of the company in American hands.

The deal announced by ByteDance will see up to 20% of TikTok Global sold, with Oracle and Walmart given first preference to purchase the stake. A source familiar with the situation told Caixin that Oracle would pay $7.8 billion for 12.5% of TikTok Global, while Walmart would pay $4.7 billion for 7.5%, valuing the company at $62.5 billion.

While Trump has indicated he would likely approve such a deal, another factor at play has been China’s jurisdiction over the deal. In particular, changes to China’s technology export rulespublished three weeks ago appeared to include the software that powers TikTok, which is a key component behind its success and would now require Beijing’s approval.

TikTok appeared to address that issue in a statement on Monday, in which it sought to clarify several areas of confusion. “The current scheme does not involve any transfer of algorithms or technologies,” ByteDance said in the statement. “Oracle has security access to TikTok’s US source code.”

The statement also sought to dispel talk that ByteDance was planning to sell a majority of TikTok Global, while also hinting that an IPO for the unit could be in the works. “TikTok Global is 100% owned by ByteDance, with headquarters in the United States,” ByteDance said. “TikTok Global plans to conduct a small pre-IPO fundraising round, after which TikTok will own 80% of the company.”

ByteDance previously confirmed that under its deal with Oracle and Walmart, Oracle will host all of its U.S. data and secure its computer systems. TikTok said it was working with Walmart on a commercial partnership. The deal was forced by a pair of bans Trump issued in August citing national concerns over TikTok’s Chinese ownership. TikTok Global will likely be headquartered in Texas and will hire “at least” 25,000 people, Trump said.

The article was first published on caixinglobal.com 

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.