TikTok will be headquartered in the US with Oracle as minority shareholder in plan to avoid ban

TikTok will be restructured as part of a new company headquartered in the United States while Oracle, which will own a minority stake in the app’s global operations, will manage Americans’ user data in hopes of winning the approval of President Trump, it has been reported.

The changes are part of an agreement between Oracle and TikTok’s Chinese-based parent company, ByteDance, that is subject to approval by the Trump administration.

Trump has vowed to ban the service by September 20 if it is not sold to an American company that would have oversight of user data.

ByteDance, TikTok’s Beijing-based owner, had been in talks to divest the US business of its hugely popular short-video app to Oracle or Microsoft after Trump ordered the sale last month and said he might otherwise shut it down.

While TikTok is best known for dancing videos that go viral among teenagers, US officials are concerned user information could be passed to China’s Communist Party government. 

TikTok, which has as many as 100 million US users, has said it would never share such data with Chinese authorities.

The TikTok user data is currently stored in Alphabet Inc’s cloud, with a backup in Singapore. 

Sale negotiations were upended when China updated its export control rules last month, giving it a say over the transfer of TikTok’s algorithm to a foreign buyer. 

Reuters reported last week that China would rather see TikTok shut down in the United States than allow a forced sale. 

Oracle and ByteDance hope that the new arrangement, which will include a promise to create 20,000 new American jobs, will receive the president’s blessing even though it appears to stop short of the demand for the Chinese company to completely divest from TikTok.

On Sunday, Microsoft said it had been informed by ByteDance that the Chinese firm would not be selling it TikTok’s US operations. 

The CEO of TikTok’s parent company was reportedly upset Microsoft said the social media platform posed a ‘security risk’ that it could ‘fix’ before talks over a sale of the app collapsed in favor of a partnership with Oracle.

ByteDance founder and CEO Zhang Yiming’s decision to drop his pursuit of a sale of TikTok’s US operations to Microsoft in favor of a partnership with Oracle was the culmination of weeks of pressure from China’s government and the Beijing-based firm’s investors, according to people familiar with the deliberations.

Walmart, which had joined Microsoft’s bid, said it was still interested in investing, and that it would talk further with ByteDance and other parties. 

As per terms of the agreement, Oracle will have a minority stake in TikTok’s global operations, not just their American-based holdings.

ByteDance, however, will maintain a controlling stake in the new US-based entity, Financial Times reported. 

US lawmakers of both major parties voiced skepticism about the proposed deal that appears to stop short of a full sale of ByteDance’s popular social media app as demanded by Trump.

Oracle announced on Monday it was part of a proposal submitted by ByteDance to the Treasury Department to serve as ‘trusted technology provider,’ to Bytedance, with no further details on the terms of the deal.

Trump has made it clear he wants to see an outright sale of TikTok to a US company, raising questions about the deal’s approval amid concerns that US user data could be passed on to China’s government.

Trump issued an executive order last month that would ban TikTok in the United States as early as September 20 if ByteDance does not comply with a sale.

In a letter to Treasury Secretary Steven Mnuchin, who heads a national security panel that reviews such deals, Republican Senator Josh Hawley called on Monday for the proposal to be rejected.

‘An ongoing “partnership” that allows for anything other than the full emancipation of the TikTok software from potential Chinese Communist Party control is completely unacceptable, and flatly inconsistent with the President’s Executive Order,’ Hawley wrote.

Democratic Senator Richard Blumenthal stopped short of demanding the deal be scuttled but sought key assurances.

‘I want specific, ironclad commitments on how Oracle & ByteDance will guarantee users’ privacy, cyber security, & freedom of expression,’ he tweeted.

While the Trump administration has not yet said whether it will approve the deal, White House adviser Jared Kushner on Tuesday said the White House is reviewing Oracle’s bid, even as other lawmakers took aim specifically at the firm’s own track record.

‘Making Oracle a middleman won’t protect Americans against Chinese government influence, and to make matters worse, Oracle has an awful record of harvesting and selling Americans’ private data to anyone with a credit card,’ Democratic Senator Ron Wyden said in a statement.

Oracle did not immediately respond to a request for comment, but in 2015, it settled allegations by the Federal Trade Commission that it failed to notify customers about unaddressed hacking dangers when it released security updates for the estimated 850 million U.S. computers with Java SE software.