Trump approves deal between TikTok & Oracle, with whom he shares close ties

ByteDance rejected Microsoft in favour of Oracle, whose CEO and co-founder are Trump supporters.

Julia Yeo | September 21, 2020, 09:51 PM

United States (U.S.) President Donald Trump told reporters on Saturday, Sep. 19, that he has approved the deal between ByteDance and tech giant Oracle, putting on hold the ban on popular video-sharing app TikTok.

ByteDance is the company that owns TikTok. It is the U.S. counterpart of Douyin.

Previously, Trump had signed off an executive order against TikTok in the U.S., giving Chinese-owned ByteDance 45 days to sell off its operations in the U.S., or TikTok would risk a ban.

Due to the vast amount of user data it collects, TikTok has raised suspicions of U.S. government officials, who have expressed concerns on how it could be potentially be used as a spying tool.

While the Oracle-TikTok deal has raised many questions on how it could prevent that from being a concern, considering that ByteDance would still remain a majority stakeholder of the TikTok Global company headquartered in the U.S., Trump has gone ahead to give the deal his blessings.

Timeline

Here's a brief breakdown of what happened from August to September 2020 regarding the TikTok saga:

August 2020: Trump gives ByteDance ultimatum

Citing national security concerns, Trump gave the Chinese company an ultimatum in August -- sell TikTok's operations to a U.S. company, or face the threat of getting banned in the entire country.

The executive order signed by Trump gave ByteDance until Sep. 15, 2020 to find a buyer, essentially around 45 days.

Companies in talks to buy TikTok

While a number of companies showed interest in buying TikTok, Microsoft's CEO held constructive talks with Trump, promising a review of the app's security, and confirmed that the company was committed to acquiring TikTok.

Besides Microsoft, IT corporation Oracle also joined talks to buy TikTok. Co-founder Larry Ellison was reportedly working with a few U.S. investors to buy all of TikTok's operations in the country, according to FT.

Trump comments on who should buy TikTok

Trump made several public comments about the sale of TikTok throughout August, including who should buy the company.

While Trump initially told reporters that he didn't support the deal involving Microsoft buying over TikTok according to NBC News, he did a u-turn later on when he spoke at the White House on Aug. 3.

Trump said he would not mind if "Microsoft or another very secure, “very American” company bought it instead", according to NY Times.

He however once again ruled out letting China control it "for security reasons". Trump gave a deadline of September 15 for any potential deals to happen.

September 2020 -- Microsoft deal rejected by ByteDance, Oracle's bid succeeds

On Sep. 13, Microsoft revealed that it was no longer acquiring TikTok after its bid was rejected by ByteDance.

An hour after Microsoft's announcement, reports of Oracle successfully acquiring the TikTok deal made headlines.

According to SCMP, TikTok will be owned by a new company named TikTok Global, headquartered in Texas.

The TikTok-Oracle deal will give Oracle a 12.5 per cent stake in TikTok global, and store all its U.S. user information on its cloud, in compliance with U.S. national security requirements.

Its parent company, ByteDance, will remain as a majority shareholder of TikTok Global.

Trump approves TikTok-Oracle deal 'in concept'

CNN Business quoted Trump telling reporters on Sep. 19 that he had approved a deal "in concept", involving ByteDance, TikTok's China-based parent company, and two US companies, Oracle and Wal-Mart.

"I have given the deal my blessing," Trump told the media before his departure on campaign travel.

Oracle confirmed in a statement to CNN Business that the deal will involve Oracle and Wal-Mart owning up to 20 per cent of TikTok Global.

"If they get it done, that's great. If they don't, that's okay, too," Trump reportedly said.

Why did ByteDance pick Oracle and not Microsoft?

According to The Guardian, Microsoft had plans to fully acquire all of TikTok, with a deal ranging from US$20 billion to US$50 billion.

With dreams of taking over TikTok's operations all over the world, Microsoft's deal was aligned to the stated interest of the U.S. government, for a U.S. firm to take full control of TikTok's operations in the U.S., and acquire ByteDance's algorithm for TikTok as well.

However, ByteDance was less keen on the deal, as the Chinese-owned company's goal was to expand TikTok as part of ByteDance's global arm.

Oracle provided a suitable deal for ByteDance, allowing the company to hold on to the majority stake in TikTok Global and keep its algorithm, while fulfilling the U.S. government's requirement for operations to be handled by a U.S. firm.

However, the deal is still inadequate if compared to the initial requirements set by the Trump administration.

Oracle boss a 'rare ally' of Trump in Silicon Valley

Oracle's co-founder Larry Ellison has long been known as one of Trump's rare open supporters among the U.S. tech scene.

In February 2020, Ellison caused a stir when he hosted a fundraiser for Trump, with several employees protesting against the move. Around 300 employees showed their displeasure by organising a walk-out, while others signed online petitions against it.

In April, Ellison said in a Forbes profile interview that he supported Trump, and wanted him to do well.

Trump has also openly said that he was a fan of Ellison, according to Guardian.

Oracle's co-founder is not the only Trump supporter in the company as well -- Oracle CEO Safra Catz donated more than US$130,000 to Trump's re-election efforts in 2020, according to the U.S. Federal Election Commission website.

Political observers in the U.S. have suggested that Ellison and Catz's ties with Trump gave Oracle an edge in this deal.

Does TikTok really pose a national security concern for the U.S.?

According to Bloomberg, Trump's TikTok demand could have been an opportunity for him to score political points.

Despite the Oracle-TikTok deal being quite different from what Trump had originally asked for, which was for the U.S. company to fully buy out TikTok's operations in the U.S. from ByteDance, Trump still gave his stamp of approval "in concept".

In fact, Oracle's deal with ByteDance was something that the Chinese company had been willing to do since months ago, as its executives had been considering options such as creating a new management board for TikTok, or establishing a headquarters for the app outside of China to separate TikTok's operations from China, according to WSJ.

Trump's willingness to accept the compromised deal could indicate that his initial attitude towards TikTok's potential national security risk might have been exaggerated.

With the U.S. Presidential election coming up, it is also unlikely for Trump to risk angering millions of TikTok users in the U.S. with a total ban on the popular app.

Furthermore, a ban on TikTok may trigger retaliation against U.S. businesses in China from Beijing, which will likely cause a dent in the U.S. stock market, a scenario that Trump would want to avoid.

What's next the Oracle-TikTok deal?

While the deal seems to have been approved by Trump, it isn't fully in the clear yet.

The deal must also be approved by the Chinese government, according to a spokesperson from ByteDance, reported WSJ.

However, things seem to be looking up for ByteDance and Oracle, after Chinese state media Global Times' editor-in-chief opined on Sep. 20 that the deal for ByteDance seemed "reasonable".

If the deal goes through, it is still unclear who will stand to benefit the most. However, TikTok users in the U.S. will at least be relieved that their beloved app won't be disappearing from their phones anytime soon.

Related story:

We deliver more stories to you on LinkedInMothership Linkedin

Top image via Getty, Flickr, TikTok