On March 14, 2023, it was reported by Bloomberg News that TikTok, the popular short-form video app, is considering separating fromByteDance, its parent company. The reason for this move is to address concerns from the United States government about national security risks posed by the app. According to sources familiar with the matter, a divestiture could result in a sale or initial public offering.
This potential move is considered a last resort and will only be pursued if the company’s existing proposal with U.S. national security officials does not get approved. TikTok is currently undergoing a national security review by the Committee on Foreign Investment in the United States (CFIUS), and last year, it agreed to implement a number of measures under the plan dubbed “Project Texas” to appease hostile lawmakers.
However, CFIUS has stalled in its process, leaving TikTok uncertain about whether its plans will be sufficient to continue operating in the country. According to the report, members of CFIUS from the Justice Department have been unwilling to accept TikTok’s proposal.
Security reasons will lead to the separation of TikTok from ByteDance
TikTok, which is used by more than 100 million Americans, has faced increasing scrutiny over fears that user data could end up in the hands of the Chinese government, potentially undermining Western security interests. As a result, TikTok CEO Shou Zi Chew is due to appear before the U.S. Congress next week.
CFIUS is a powerful national security body that, in 2020, unanimously recommended that ByteDance divest TikTok due to concerns about user data potentially being passed on to China’s government. TikTok and CFIUS have been negotiating for more than two years on data security requirements. TikTok has said that it has spent more than $1.5 billion on rigorous data security efforts and rejects spying allegations.
The separation will bring consequences for TikTok
The potential separation of TikTok from ByteDance would be a significant move for the app, which has become a cultural phenomenon around the world, particularly among younger users. TikTok’s popularity has skyrocketed in recent years, making it one of the most widely used social media apps globally. However, this success has come with a price, as TikTok has faced numerous challenges related to its ownership and data practices.
If TikTok were to separate from ByteDance, it would join a growing list of Chinese tech companies that have gone public or spun off from their parent companies in recent years. This includes Alibaba’s Ant Group, which went public in late 2020, and Tencent’s music streaming service, which was spun off in 2021.
However, any potential separation of TikTok from ByteDance is likely to face significant hurdles. The process would need to be approved by both U.S. and Chinese regulators, and it would require the agreement of ByteDance’s leadership. Additionally, a sale or initial public offering would need to be carefully planned and executed to ensure that TikTok continues to operate smoothly and without interruption.
The situation with TikTok highlights the increasingly complex relationship between the U.S. and China, particularly in the technology sector. As the world becomes more interconnected, the issue of data security and national security risks will only become more pressing, and companies like TikTok will need to navigate these challenges carefully to continue to grow and succeed in the years to come.
About ByteDance
ByteDance is a Chinese multinational internet technology company headquartered in Beijing, China. It was founded in 2012 by entrepreneur Zhang Yiming, and it has quickly become one of the most valuable startups in the world.
ByteDance is best known for its popular short-form video app, TikTok, which has exploded in popularity in recent years, particularly among younger users. However, ByteDance also owns a range of other popular apps and services, including the Chinese news aggregator Toutiao and the social networking app Douyin.
The company has raised billions of dollars in funding from investors, including Sequoia Capital, SoftBank, and General Atlantic, and it has been valued at over $400 billion in recent years. ByteDance is also known for its ambitious global expansion plans, with the company seeking to expand its presence in markets around the world.
