TikTok split from China parent mulled

Leadership discusses divestiture to address U.S. concerns about security risks

TikTok is under scrutiny for its Chinese ownership, which U.S. officials are concerned will lead to manipulation or spying by China on Americans

TikTok’s leadership is discussing the possibility of separating from ByteDance, its Chinese parent company, to help address concerns about U.S. security risks.

A divestiture, which results in a sale or initial public offering, is considered a last resort, to be pursued only if the company’s existing proposal with national security officials doesn’t get approved, according to people familiar with the matter, who asked not to be identified discussing nonpublic information. Even then, the Chinese government will have to agree to such a transaction, the people said.

TikTok’s U.S. business is valued at an estimated $40 billion to $50 billion, according to Bloomberg Intelligence analysts Mandeep Singh and Damian Reimertz.

TikTok is under scrutiny for its Chinese ownership, which U.S. officials are concerned will lead to manipulation or spying by China on Americans — a fear TikTok is working to address. The company, which is undergoing a national security review by the Committee on Foreign Investment in the United States, agreed last year to implement a number of changes in a plan it calls Project Texas.

The proposal includes bringing in American tech giant Oracle to host U.S. user data and review its software and appointing a three-person, government-approved oversight board. Many of the moves are already underway.

But the committee, which is a panel of multiple agencies involved in national security, has stalled in its review process, leaving TikTok unsure whether its plans will be sufficient to continue operating in the United States, the people said. Members of the committee from the Department of Justice have been unwilling to accept TikTok’s proposal, according to other people familiar with the matter.

“Neither a ban of TikTok nor a divestiture of TikTok from ByteDance does anything to address national security concerns about data transfers,” said Brooke Oberwetter, a spokesperson for TikTok. “Under Project Texas, TikTok data for our U.S. users would be held to a significantly higher security standard than any comparable American company.”

TikTok is also facing a barrage of potential legislation in Congress, some of which mandates a separation. Lawmakers, concerned the app is being forced to share data with the Chinese government or will be used as an influence tool by China, have proposed multiple bills with bipartisan support that call for banning the video-sharing app or selling it.

TikTok CEO Shou Chew has been asked to testify before a House committee next week about the app’s data privacy and security practices and the company’s relationship with the Chinese Communist Party.

The Canadian civil service, the European Commission and the U.S. Congress have also banned staff from using the app because of concerns about how the company collects data. The U.K. is also weighing banning it from government devices, a person familiar with the matter said. Last month, four privacy regulators in Canada also launched an investigation into TikTok over its collection, use and disclosure of personal information.

ByteDance was valued at about $220 billion in a recent private-market investment by Abu Dhabi AI firm G42, Bloomberg News reported separately. That’s a significant discount to the $300 billion that TikTok’s owner set during a share buyback program last year.

G42, controlled by United Arab Emirates royal Sheikh Tahnoon bin Zayed Al Nahyan, acquired a $100 million-plus stake from existing investors in recent months through its 42XFund, people with knowledge of the deal said. Another fund bought into ByteDance at $225 billion shortly afterward, one of the people said, asking not to be identified describing nonpublic information.