TikTok has established a new US data security arm to enact a deal brokered by Donald Trump that will end a years-long geopolitical saga over the fate of the video app while leaving its core US business in the hands of its Chinese parent company.
The new American-controlled joint venture, unveiled by TikTok on Thursday, would “safeguard the US content ecosystem and have decision-making authority for trust and safety policies and content moderation”, the company said.
TikTok said it had appointed a new seven-person board of directors for the joint venture, which included Egon Durban, the co-chief executive of private equity firm Silver Lake, Susquehanna International Group managing director Mark Dooley, and top Oracle executive Kenneth Glueck.
Their companies are all part of the consortium of US investors who will own 80 per cent of the joint venture.
“The majority American owned Joint Venture will operate under defined safeguards that protect national security through comprehensive data protections, algorithm security, content moderation, and software assurances for US users,” TikTok added.
But the terms of the agreement give Beijing-based ByteDance direct control of the app’s main business lines in the US, including ecommerce, advertising and marketing.
Two people familiar with the matter said that many of TikTok’s employees in the US would remain employed by units under ByteDance.
“[The deal] saves the US market for TikTok and leaves ByteDance with most of the economic benefits,” said one early investor in the Chinese company.
ByteDance’s valuation in private market transactions has risen to about $500bn in recent weeks, two people familiar with the matter said.
Its shares had traded at a valuation below $300bn after a law came into effect requiring that TikTok’s parent sell its stake in the app or be banned in the US.
Critics argue that the final structure of Trump’s deal, while delivering easy returns for American investors and introducing some new data protection for US users, appears to fail to fully address national security concerns.
“There remains a disconnect between the agreement and the spirit of what the statue required,” said Brett Freedman, who served as chief of staff of the national security division at the Department of Justice during the Biden administration.
He added: “There are larger issues at play. We have an administration that wants to have a ‘grand bargain’ with the PRC [People’s Republic of China] and that colours to some extent what they might have agreed to.”
Just over a year ago, TikTok briefly went dark for its 170mn US users after the ban-or-divest law came into effect.
The Joe Biden-era legislation stemmed from concerns that the app could allow Beijing to manipulate the content seen by users for propaganda purposes, or to access data for espionage purposes.
Trump, newly elected and enamoured with his popularity among younger voters on the platform, quickly brought the app back online, having promised to “save” it.
Over the past 12 months, the president issued a number of executive orders that extended the deadline for forging a deal.
Vice-president JD Vance was tasked with fashioning a deal that would please the president while gaining approval from Beijing.
A takeover of TikTok’s US business attracted interest from major private equity and venture capital investors such as Andreessen Horowitz, Coatue and KKR, as well as tech groups such as Amazon and Perplexity.
The final compromise is a joint venture majority-owned by the US investors Oracle, Silver Lake and the Emirati investment vehicle MGX, each holding 15 per cent.
Other investors in the consortium include Dell chief executive Michael Dell and the family office of French entrepreneur Xavier Niel — as well as affiliates of General Atlantic and Jeff Yass’s Susquehanna, which were both previous investors.
ByteDance would take 19.9 per cent of the new company, the most allowed under US law, TikTok confirmed on Thursday.
One investor in ByteDance said that they had trouble understanding how the deal was priced, suggesting that it was cheap for the new US investors and also allowed Trump to continue to benefit from his growing audience on the platform.
Vance has said that the deal valued TikTok’s joint venture at $14bn. ByteDance anticipates 2025 earnings before interest, taxes, depreciation and amortisation of $66bn on revenues of $192bn, according to one person familiar with the matter.
The value of the new US group could be the result of ByteDance’s continued control over TikTok’s main business lines.
Relations between the American data security arm and ByteDance would be governed by complicated contracts that will see the Chinese group share a portion of US earnings with the joint venture, two people familiar with the matter said.
A crucial point of contention has been whether Beijing will be able to retain control of TikTok’s sophisticated recommendation algorithm.
The joint venture will licence the algorithm from ByteDance, but then “retrain, test and update the content recommendation algorithm on US user data,” TikTok said on Thursday. “The content recommendation algorithm will be secured in Oracle’s US cloud environment,” it added.
Oracle, which is led by Trump ally Larry Ellison, will also guarantee the security of US user data. TikTok’s US staff in teams such as data security and content moderation will move to this new unit.
TikTok’s head of operations Adam Presser would be chief executive of the joint venture, TikTok said. Presser, who is fluent in Mandarin, has been a longtime lieutenant to TikTok CEO Shou Zi Chew. Chew will also be on the board.
TikTok said that the safeguards provided by the joint venture will also cover its other US apps, including editing tool CapCut and social media app Lemon8.
The remainder of the TikTok US team — in ecommerce, advertising and marketing — will remain under ByteDance. In early January, Chew set up a Delaware limited liability company called TT Commerce & Global Services LLC, registering it to the address of the TikTok US headquarters.
James Lewis, distinguished fellow at the Center for European Policy Analysis, said that the US outfit had been created because ByteDance had prioritised maintaining control of TikTok’s fast-growing ecommerce business.
“The law very clearly says the divestiture can have no co-operation with respect to the algorithm,” said Adam Conner, vice-president for Technology Policy at American Progress, a non-partisan policy group.
But the legislation also gave the US president authority to decide whether a proposed transaction complied with its provisions.
Trump has approved the new structure and helped win over Chinese President Xi Jinping, who also needs to sign off on the transaction. While Beijing has yet to publicly endorse the final structure, China has given the green light to the outline of the deal.
Critics of China “were hoping to put TikTok out of business and some of the other social companies were encouraging them with those beliefs”, said Lewis. “The China hawks have been losing steadily as people would rather do business with China rather than cut it off.”
“There’s a lot of questions about who got selected [to participate in the deal in the US]. We know there were other bids willing to pay more money,” said Conner. “The Trump administration ignored a law on the books, claimed sweeping executive power to do so and picked donors and allies of Trump to buy it at a discount.”
“This is ripe for oversight if a new Congress were to have an interest in investigating.”
Additional reporting by George Hammond in San Francisco and Ellie Olcott in Beijing