TikTok Considers Splitting From ByteDance If Deal With U.S. Fails

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

A divestiture, which could result 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 declined to be named discussing non-public information. Even then, the Chinese government would have to agree to such a transaction, the people said.

TikTok’s U.S. business could be valued at $40 billion to $50 billion based on social media multiples and other factors, according to Bloomberg Intelligence analysts Mandeep Singh and Damian Reimertz.

TikTok is under scrutiny for its Chinese ownership, which U.S. officials are concerned could 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 Corp. 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 under way.

But Cfius, which is a panel of multiple agencies involved in national security, has stalled in its review process, leaving TikTok unsure of whether its plans will be sufficient to continue operating in the U.S., the people said. Members of the committee from the Justice Department 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 that the app may be forced to share data with the Chinese government or could 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 Chief Executive Officer 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.

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 a $225 billion shortly after, one of the people said, asking not to be identified describing non-public information.