A combination of a last-minute deal and a court injunction mean that bans on downloads and updates for Chinese-owned TikTok and WeChat have been averted, and the applications are still available to users in the U.S. — at least for now.
On Sunday, President Donald Trump said that he had given his “blessing” to a TikTok deal in which Oracle will take a 12.5% stake in a newly formed U.S.-based company, TikTok Global, and will become TikTok’s “secure cloud technology provider” in the United States. American retail behemoth WalMart is also taking a 7.5% stake in the company, for a combined 20% ownership of TikTok Global between the two companies.
Oracle CEO Safra Catz said in a statement that Oracle is “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.” TikTok has an estimated 100 million users in the U.S.
Oracle framed the move as a “technical decision by TikTok,” but President Donald Trump has declared both TikTok and Tencent’s WeChat a threat to U.S. national security because of the user data that the companies collect. The Commerce Department had rules ready to take effect Sunday that would ban WeChat completely and make TikTok unavailable for download by U.S. residents, although the app wouldn’t have been disabled completely Nov. 12 — after the upcoming presidential election. The Trump administration has now postponed the TikTok ban until next week.
Some of the details of the deal are fuzzy — it’s still in negotiation, but Bytedance says the partners have reached “principled consensus.” According to a press release from Oracle, “TikTok Global will be majority owned by American investors, including Oracle and Walmart. TikTok Global will be an independent American company, headquartered in the U.S., with four Americans out of the five member board of directors.” Oracle claims that “all the TikTok technology will be in possession of TikTok Global” and that Oracle’s cloud technology will “[eliminate]the risk of foreign governments spying on American users or trying to influence them with disinformation.”
However, Bytedance said in a public statement that TikTok Global as initially formed will be 100%-owned subsidiary of Bytedance, but it will be headquartered in the United States and will be taken public. TikTok Global plans to launch a small round of pre-IPO financing, in which Oracle and WalMart will participate to buy their stakes, and after the financing, TikTok Global will become a holding subsidiary of Bytedance, with Bytedance holding 80% ownership. None of the companies have specified how much Bytedance might control after the IPO. Bytedance is reportedly seeking a valuation of $60 billion for TikTok Global. The initial board of directors of TikTok Global will include the founder of Bytedance and its current directors, plus the CEO of WalMart, Doug McMillon. TikTok also said that its proprietary algorithms will not be transferred, but Oracle may check its code.
In addition, President Trump said multiple times over the weekend that the companies made a $5 billion commitment as part of the deal that will be used to promote “patriotic education”. Bytedance contested that statement, saying that the $5 billion figure is a forecast of the taxes that it would be paying over the next few years. Trump categorized the $5 billion as a contribution to an educational fund that he asked the heads of the involved companies to make. Oracle said that TikTok Global will bring 25,000 jobs and $5 billion in new tax dollars to the U.S. and that the company, along with Oracle, SIG, General Atlantic, Sequoia, Walmart and Coatue, would “create an educational initiative to develop and deliver an AI-driven online video curriculum to teach children from inner cities to the suburbs, a variety of courses from basic reading and math to science, history and computer engineering.”
In the case of WeChat, a federal judge has temporarily barred the ban on WeChat from taking effect, after a group of U.S.-based WeChat users sued, arguing that the ban violated their First Amendment rights to free speech, assembly and worship. The social media, Chinese-language news and mobile payments app is commonly used by Chinese students in the U.S., business people with ties to China and U.S. residents staying in touch with friends and family in China; some U.S. companies use a mini-version of it to engage with customers in China as well as to support mobile transactions overseas. One of the plaintiffs in the lawsuit uses the app to run a mental health outreach charity focused on the Chinese community, because of the lack of available Chinese-language alternatives to send out information and coordinate volunteers.
U.S. Magistrate Judge Laurel Beeler wrote that based on the users’ evidence, “WeChat is effectively the only means of communication for many in the community, not only because China bans other apps, but also because Chinese speakers with limited English proficiency have no options other than WeChat.”
She also wrote, “While the government has established that China’s activities raise significant national security concerns — it has put in scant little evidence that its effective ban of WeChat for all U.S. users addresses those concerns.” She also said that there were potential alternatives to a complete ban on the app, such as a ban on downloading the app to government devices.
According to Beeler’s preliminary injunction, WeChat has 19 million regular users in the U.S. According to app analytics company Sensor Tower, there was a significant spike in downloads of the app on Friday and Saturday, ahead of the expected ban. The Commerce Department told Reuters this morning that it plans to challenge the injunction.