Over the weekend there was a lot of confusion regarding the agreement found between TikTok and some American companies to prevent the Chinese social network from being banned in the United States, as ordered by the Trump administration. Oracle and Walmart, TikTok's main partners, unveiled a draft deal on Saturday and Trump enthusiastically approved it and postponed the ban on TikTok to give the parties more time to close the deal.
On Monday, however, ByteDance, which is the Chinese company that owns TikTok, wrote in a statement that some of the information circulated over the weekend was “rumors”, and questioned some elements of the deal that had been described. by Trump as an American hit.
What Oracle and Walmart said
In the United States, the main information on the deal came from a statement released Saturday by Oracle and Walmart, in which the two companies say ByteDance has agreed to create a new company, TikTok Global, which will be based in the United States and will manage the social network's operations for users in the United States and for “most users in the rest of the world.” Oracle and Walmart, which are a multinational cloud services company and the world's largest supermarket chain, respectively, will buy 20 percent of this new company (US media says Oracle will have 12.5 percent and Walmart 7. 5). According to the two companies, TikTok Global “will be mostly owned by American investors”.
Four Americans out of five total seats will sit on the board of directors and “all TikTok technology will be available to TikTok Global”. In the new company, Oracle will provide the technology infrastructure and take care of security, while Walmart will provide its “multi-channel sales capabilities,” an unclear term that suggests a development in the e-commerce sector. TikTok Global, the statement reads, will create 25,000 new jobs in the United States and pay $ 5 billion in taxes. The company will also produce a tool for children's education based on artificial intelligence.
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What Trump said
Speaking with reporters at the White House, Trump said he approved the agreement found between the Chinese and American companies, while the The Commerce Department, which announced it would ban downloading TikTok starting at midnight on Sunday, gave it another week to finalize the deal. “I gave my blessing to the deal,” Trump said. “I approved the agreement in theory”.
Trump also said the new company “will have nothing to do with China”. “It will be a whole new company. It will have nothing to do with any foreign land, any foreign country. ' Trump also said that TikTok has promised to create a five billion dollar fund to “teach American children the true history of our country.” The five billion is likely to be the same that Oracle and Walmart have said TikTok Global will pay in taxes.
What TikTok said
In a Chinese release published Monday on Toutiao, a news app it owns, ByteDance wrote that it will keep a stake of 80 percent in TikTok Global and that the news that the new company will have an American majority ownership are “rumors”. On this point, some analysts, as well as the White House, have tried to reconcile the two versions with a complicated mathematical calculation: since ByteDance is already 40 percent owned by various American investors, if we add the share of 20 per cent that Oracle and Walmart will buy into TikTok Global would mean that 53 per cent of the investors in the new company are ultimately American. Analysts are skeptical of this calculation, also because it is not yet clear how these percentages will translate into effective control over the new company.
ByteDance also said that the deal does not involve any technology transfer between TikTok and TikTok Global, and that TikTok's algorithm will remain in its control. Oracle will be able to inspect the TikTok code, and therefore also the algorithm, but only for “security” reasons. This point is important because the algorithm is the central part of the whole social network business. Furthermore, the algorithm and in general the control of all the technological part of TikTok were the official reason why the American administration wanted to ban the app: to remove sensitive data of American citizens from the theoretical availability of the Chinese Communist Party. According to experts heard by Bloomberg, as long as the algorithm remains in the hands of ByteDance it is not possible to completely eliminate the problem. Safra Catz, the CEO of Oracle, said he is “100 percent sure” of his company's ability to keep American data safe.
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According to Bytedance, the five billion dollars in new taxes that TikTok Global is expected to pay is actually an estimate based on sales forecasts and certain taxes that are already expected to be paid. About the fund to teach American children history, ByteDance said he didn't know anything.
TikTok seems to have done well
According to the Wall Street Journal, there are good reasons why China might like the deal reached on TikTok. In August, when Donald Trump signed his first executive order to ban TikTok in the United States, it appeared that ByteDance would be forced to sell its international operations and at least partially lose control of its algorithm. Under the agreement, neither will happen and this should allow the Chinese government to approve it. The Global Times, an English-language nationalist tabloid dependent on the Communist Party, wrote in an editorial published on Sunday that thanks to the ByteDance deal, “it's not out of the game” and avoided the worst-case scenario.
