TikTok considers splitting from Chinese parent if deal with US fails

TikTok’s leadership is discussing the possibility of separating from ByteDance, its Chinese parent company, to help address concerns in the US 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 US business could be valued at $US40 billion ($59.8 billion) to $US50 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 US 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.

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The proposal includes bringing in American tech giant Oracle to host US 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 US, the people said. Members of the committee from the US 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 US users would be held to a significantly higher security standard than any comparable American company.”