Everything we know so far about Oracle not actually buying TikTok

It was a weird weekend to end a weird summer for one of the country’s most popular social media apps, TikTok. First, in August, the Trump administration threatened to ban TikTok unless it found a US buyer. Then last weekend, one-time dark horse Oracle emerged victorious in a federally mandated contest to acquire TikTok. Except, it turns out, Oracle isn’t actually acquiring TikTok at all—and Oracle and TikTok’s current parent company, ByteDance, disagree on who is going to be in charge.

If you’re confused, you’re in good company. Here’s our attempt to lay out everything we know about TikTok, Oracle, and their mysterious deal so far.

What is TikTok? Who owns it?

TikTok is an extremely popular short-form video app used worldwide. The app appeared in its current incarnation after its parent company, Beijing-based ByteDance, acquired US startup Musical.ly in 2017 and integrated it with its existing TikTok product under the TikTok name.

Why is TikTok being banned?

President Donald Trump on August 6 issued an executive order determining TikTok to be a national security threat, writing:

TikTok, a video-sharing mobile application owned by the Chinese company ByteDance Ltd., has reportedly been downloaded over 175 million times in the United States and over one billion times globally. TikTok automatically captures vast swaths of information from its users, including Internet and other network activity information such as location data and browsing and search histories. This data collection threatens to allow the Chinese Communist Party access to Americans’ personal and proprietary information—potentially allowing China to track the locations of Federal employees and contractors, build dossiers of personal information for blackmail, and conduct corporate espionage.

TikTok also reportedly censors content that the Chinese Communist Party deems politically sensitive, such as content concerning protests in Hong Kong and China’s treatment of Uyghurs and other Muslim minorities. This mobile application may also be used for disinformation campaigns that benefit the Chinese Communist Party, such as when TikTok videos spread debunked conspiracy theories about the origins of the 2019 Novel Coronavirus.

TikTok, for its part, has vigorously and repeatedly denied that it passes US user data through China or gives the Chinese government access to US users’ personal information.

The ban on TikTok was initially scheduled to go into effect on September 20.

Is that legal?

The White House obviously thinks so. TikTok disagrees. The company filed a lawsuit against the federal government on August 24, arguing that the administration’s efforts to ban TikTok or force a sale are part of “an anti-China political campaign” and are “not rooted in bona fide national security concerns.”

So TikTok is banned?

Not yet. The Department of Commerce late Saturday issued a one-week extension bumping TikTok’s theoretical ban from September 20 to Sunday, September 27. You can still download, update, and use TikTok however you want inside the US today.

They will likely issue another extension before next Sunday’s new deadline, unless something else unpredictable happens.

Why is TikTok not banned now?

Before issuing the executive order, Trump in early August issued a personal ultimatum to TikTok requiring it to find a US buyer or else face a ban. A second executive order (PDF), issued August 14, determined retroactively that ByteDance should never have been able to acquire Musical.ly in the first place and demanded TikTok be spun back off to a US owner.

Microsoft had since early August been in talks to acquire part or all of TikTok’s operations. Oracle and Walmart both entered the race later that month. Late on September 13, The Wall Street Journal was first to announce that Oracle, headed by Trump supporter Larry Ellison, won out in the end.

Did Oracle buy TikTok?

Oracle did not buy and is not buying TikTok—but it is investing in the company.

The transaction, as we currently understand it, has ByteDance spinning off TikTok operations in the United States and most other nations to a new company, TikTok Global.

Oracle will hold a 12.5 percent stake in TikTok Global at its inception and will also serve as the cloud hosting provider for the new entity. Walmart will hold another 7.5-percent stake. The remaining 80 percent will be held by ByteDance. The new company also plans to launch an initial public offering of stock before the end of 2021. That much we know for certain.

What other conditions are there on the deal?

Oracle and Walmart promised the TikTok Global investment would bring 25,000 jobs to the United States, which Trump now seems to be saying will be based in Texas. The president also first said in August he wanted the Treasury to get a big cut of the deal.

“We set a date, I set a date, of around September 15th, at which point it’s going to be out of business in the United States. But if somebody, whether it’s Microsoft or somebody else, buys it, that’ll be interesting,” Trump told reporters at the time, adding:

More than anything else, I said a very substantial portion of that price is going to have to come into the Treasury of the United States. Because we’re making it possible for this deal to happen. Right now, they don’t have any rights, unless we give it to them. So if we’re going to give them the rights, then it has to come into, it has to come into this country…

So it’ll close down on September 15th, unless Microsoft or somebody else is able to buy it, and work out a deal, an appropriate deal, so the Treasury of the— really the Treasury, I suppose you would say, of the United States, gets a lot of money. A lot of money.

Can he demand that?

Nobody ever has before, and there is no known legal mechanism for it, but the absence of precedents or mechanisms has not previously been a guardrail on the actions of the current administration. The US government can impose certain divestiture and behavioral conditions on mergers and acquisitions to assure antitrust compliance, and of course it can charge taxes on transactions when required. But commissions or kickbacks are not typically part of the process.

Trump on Saturday said the companies would be meeting his terms by “setting up a very large fund” for educational initiatives in Texas. “That’s their contribution that I’ve been asking for,” he added.

Walmart and Oracle said in their joint statement that TikTok Global would contribute more than $5 billion in taxes to the Treasury. The companies also confirmed part of Trump’s “educational fund” comments but did not put a value on that particular contribution, instead saying: “TikTok Global, together with Oracle, SIG, General Atlantic, Sequoia, Walmart, and Coatue will 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.”

So will TikTok be owned by China or the US?

Whether this proposed transaction puts the company in US hands appears to be wildly up for debate.

About 40 percent of ByteDance itself is held by US investors. Supporters of the deal claim that ownership would therefore translate to about 53 percent of TikTok Global being held by US investors, thus giving the US majority control.

Oracle executive Ken Glueck said today, “Upon creation of TikTok Global, Oracle/Walmart will make their investment and the TikTok Global shares will be distributed to their owners, Americans will be the majority, and ByteDance will have no ownership in TikTok Global.”

ByteDance, however, does not see it that way. In a statement today, translated and reported by CNBC and The Wall Street Journal, the company made clear that not only is Oracle not getting its core assets, but Oracle is also not gaining control of the company.

Instead, ByteDance said, TikTok Global will be created as a wholly owned subsidiary. That subsidiary will then do a round of funding (with Walmart and Oracle evidently providing those funds) that will reduce ByteDance’s stake to 80 percent. “The current plan does not involve the transfer of any algorithms and technologies. Oracle has the authority to check the source code of TikTok USA” for security reasons, ByteDance added.

“Eighty percent ownership” and “no ownership” are pretty far apart, as these things go, and it is unclear at best how that difference will be reconciled in the end.

So Trump approved the deal, right?

Yes… until he maybe doesn’t anymore.

Trump on Saturday evening gave the deal his “blessing,” telling reporters he “approved the deal in concept.”

A short time after the president’s remarks, TikTok issued a statement confirming the transaction’s approval. Around the same time, Oracle and Walmart also issued a joint statement confirming the president’s “tentative approval” of the transaction.

Trump touted the deal in an interview with Fox & Friends on Monday but hedged on a full-throated approval.

“It’s going to bring 25,000 jobs, and it’s going to be located in Texas, and they look forward to doing it,” Trump said. “So they’re moving it into our country. I like it. But we’ll see how it comes out. There can be zero security risk.”

“It’s going to be totally controlled by Oracle,” Trump added. “If we find that they don’t have total control, then we’re not going to approve the deal.”

Is China approving the deal?

That’s another giant shrug. The answer, as far as anyone can tell, is: probably. China’s export ban prevents the sale of TikTok’s proprietary assets to the United States but seems to permit an investment such as the Oracle proposal.

Chinese state-affiliated paper the Global Times this morning described the deal as “unfair” but “reasonable,” CNBC reports, finding that the plan would be better than a ban or a full sale to US interests.

However, a few hours later, Global Times Editor-in-Chief Hu Xijin said on Twitter that, based on his knowledge, “Beijing won’t approve the current agreement between ByteDance, TikTok’s parent company, and Oracle, Walmart, because the agreement would endanger China’s national security, interests, and dignity.”

The Wall Street Journal reports that experts on China are mixed, finding both that the deal is “daylight robbery” but also describing it as a win for both China and ByteDance.

Does anyone else have to sign off?

Yes. Here in the states, the Committee on Foreign Investment in the United States (CFIUS) also has to approve the planned deal.

CFIUS reviews transactions in which a foreign entity acquires a stake in a US company for any potential national security concerns that may arise. Trump’s second TikTok executive order, the August 14 one, requires CFIUS to oversee ByteDance’s divestment of its US operations. The order puts a 90-day deadline on that divestment, which works out to November 12.

Several Republican senators, including John Cornyn (R-Texas), Josh Hawley (R-Mo.), Marco Rubio (R-Fla.), Rick Scott (R-Fla.), Thom Tillis (R-N.C.), and Roger Wicker (R-Miss.), have all publicly objected to the proposed deal. The Senators all urge CFIUS to reject the proposal, arguing that it is insufficient to prevent the national security threat for which a ban or sale was being required in the first place.

US Treasury Secretary Steven Mnuchin remains confident that CFIUS will greenlight the proposal, Bloomberg reported today, but officials are also reportedly preparing for Trump to change his mind and reject the deal.