ByteDance will rather divest TikTok than sell it to Microsoft


TikTok

Microsoft has officially confirmed that it is in discussions with ByteDance over the purchase of TikTok. Specifically, this negotiation does not include Douyin, the Chinese version of TikTok. It covers TikTok’s operations in the U.S. but may also include Canada, Australia, and New Zealand. However, according to an internal source, these discussions will most likely be futile. The source claims that ByteDance founder, Zhang Yiming, and investors are unwilling to do business with an American company. 

ByteDance

According to SCMP, ByteDance board of directors will rather divest the overseas version of the app. It is willing to do this to keep its operations in the U.S. instead of an outright sale. The new entity will retain the TikTok name but will have a different management method. Furthermore, the new TikTok will no longer respond to ByteDance.

The source said: “Except Zhang Yiming, almost everyone in the room likes this split…The mood is a bit like: The founder will be out and the house will be ours…But even for Zhang himself, there is actually no choice, because if you don’t let go, the app will die”. 

The U.S. refuses to allow ByteDance to retain a minority stake at TikTok

ByteDance had previously sought to retain a minority stake in TikTok’s US operations, but the White House refused. According to Reuters, under a new proposed transaction, certain US-based ByteDance investors may have the opportunity to obtain a minority stake in the business.

The clampdown on Chinese companies by the United States is far from over. This certainly will not stop with Huawei. The American government believes that there are more Chinese companies that pose a security risk. Recent reports show that the U.S. has commenced a comprehensive containment of Chinese technology companies. The U.S. will not only ban hardware companies like Huawei, it will also prohibit Chinese software companies. As for Chinese short-video making app, TikTok, it has a way to avoid the ban. The U.S. “hammer” will not fall on TikTok if and only if it becomes an American company.

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It now appears that there are a couple of ways for this to happen. However, TikTok will not like an outright sale to an American company. In finance and economics, divestment is the opposite of an investment. It is the reduction of some kind of asset for financial, ethical, or political objectives

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