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Why the Trump administration may force TikTok's Chinese owner to sell it

Russ Mitchell, Suhauna Hussain, Los Angeles Times on

Published in Political News

After the president first threatened a ban, TikTok issued a statement: "TikTok is led by an American CEO, with hundreds of employees and key leaders across safety, security, product, and public policy here in the U.S. We have never provided user data to the Chinese government, nor would we do so if asked."

The company hired former Walt Disney Co. executive Kevin Mayer as chief executive of TikTok and chief operating officer of ByteDance in May.

In response to Friday's report of a forced sale, TikTok issued another statement: "While we do not comment on rumors or speculation, we are confident in the long-term success of TikTok. Hundreds of millions of people come to TikTok for entertainment and connection, including our community of creators and artists who are building livelihoods from the platform. We're motivated by their passion and creativity, and committed to protecting their privacy and safety as we continue working to bring joy to families and meaningful careers to those who create on our platform."

TikTok is not the first tech company caught in the middle of this international power struggle. Though Apple has found a huge market for its iPhones in China, big American internet and app companies have largely been frozen out. Facebook, Google and Twitter were blocked in 2009; Instagram in 2014; and Reddit in 2018. Millions of users in China, however, are believed to be circumventing such blocks with virtual private networks.

For years, the White House has lambasted Huawei, China's leading telecommunications equipment provider, which is attempting to install advanced 5G cellular systems in countries around the world. Critics say Huawei could use such networks for spying on data streams. Huawei consistently insists it has no such intentions.

In March, Beijing Kunlun Tech, then the Chinese owner of the LGBTQ dating app Grindr, sold a 98% stake in the company to a U.S. private equity company under pressure from the U.S. government after it was found that Grindr engineers in Beijing could access personal data on U.S. users, including their private messages and HIV status.

 

If the Trump administration forces ByteDance to sell TikTok, the list of potential buyers is relatively short, with Microsoft at the head of the line. The Redmond, Wash.-based software giant, which paid $26 billion to acquire LinkedIn in 2016, is reportedly in talks about what would be another blockbuster acquisition.

Wall Street stock analyst Dan Ives of Wedbush Securities told The Times that in his view Microsoft is the only company with the means and the desire to buy an app reportedly valued by ByteDance's investors at $50 billion -- nearly the combined market value of Twitter and Snap. Amazon, Facebook, Apple and Google, the other obvious candidates, have their own problems right now: "They're up to their eyeballs in a regulatory swirl, the last thing they're going to do is buy TikTok," Ives said, with the chief executives of all four companies called to testify at a House of Representatives antitrust hearing Wednesday.

Were they not under such scrutiny, TikTok would make a tempting acquisition target. The app has been downloaded more than 165 million times in the U.S., according to the Sensor Tower app analytics firm, and billions of TikTok videos have been uploaded. As of July 22, it was the most frequently downloaded app worldwide and No. 2 in the U.S. after Zoom (whose ties to China have raised security concerns of their own within U.S. companies and government entities). According to Sensor Tower, the rate of TikTok installation on U.S. devices has not slowed since the Trump administration first raised concerns, suggesting consumers, as yet, have not been deterred.

Microsoft did not respond to a request for comment.

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