The Wall Street Journal (WSJ) reported on the 16th that the sale of the Chinese video platform TikTok’s US unit is imminent, and the new entity will be structured so that US investors will own about 80% of the stake and Chinese shareholders will own the remainder. Sources said that TikTok’s US operations are expected to be controlled by a consortium of investors including US software and cloud infrastructure companies Oracle, Silver Lake, and Andreessen Horowitz.
Silver Lake is a private equity firm, and Andreessen Horowitz is a venture capital firm with a long history of investing in the technology industry. Existing ByteDance investors, including US investment firms Susquehanna International, KKR, and General Atlantic, will own an 80% stake in the new TikTok entity. Chinese shareholders’ stakes will be reduced to less than 20% under a law passed in the US last year. The agreement was reached during US-China negotiations held in Madrid, Spain this week.
The previous day, US President Donald Trump announced on the social media platform TruthSocial that an agreement had been reached regarding the TikTok sale, and Treasury Secretary Scott Besant also said that after completing negotiations with China, they had agreed on a framework for TikTok, saying, “The framework will transform TikTok into a US-controlled ownership structure.” The new entity will also have a US-centric board of directors, including one director appointed by the US government.
Existing US users will be asked to switch to a new app that TikTok is developing and testing, and engineers will build a new recommendation algorithm licensed from TikTok’s parent company, ByteDance. According to CNBC, Oracle will retain its cloud contract even if TikTok’s US operations are sold. Sources said the agreement currently under discussion includes a provision for TikTok to retain its cloud contract, and the deal could close within 30 to 45 days.
The source added that TikTok’s new ownership structure will include new investors as well as those from parent company ByteDance.
Oracle has been TikTok’s primary cloud infrastructure provider in the US for years, and TikTok was an early major customer of Oracle Cloud. The two companies also collaborated on Project Texas, which aims to securely manage TikTok’s US user data by separating it from ByteDance’s operations.
TikTok needed to expand its US infrastructure after facing congressional investigations into its ties to China, and chose Oracle, founded by Republican Larry Ellison, to do so. TikTok announced that it would process all of its US user traffic through Oracle servers by 2022.Ellison is known as a longtime Republican supporter, and President Trump has expressed support for Ellison’s acquisition of TikTok’s US operations.”
Removing the risk of losing revenue from TikTok will be beneficial for Oracle,” Evercore ISI analyst Kirk Materne wrote in a report. “A potential resolution of the TikTok ownership issue could be another catalyst for the stock price to rise.”
Oracle’s stock closed 1.49% on the New York Stock Exchange on the news that it would maintain its contract with TikTok. The stock also rose more than 5% during the day.
Oracle’s stock price surged 36% the following day, its biggest jump in 33 years, after the company announced in its quarterly earnings report on the 9th that its cloud backlog reached $455 billion, 2.5 times the market’s expectations.