Questions linger over the fate of the immensely popular social media app TikTok after the US House of Representatives passed a bill forcing Chinese parent company ByteDance to divest or face a full-on ban.
The ultimatum emerged in a bipartisan vote on Wednesday when 352 House members voted to force ByteDance to sell TikTok’s US operations to an approved buyer.
“While there are many questions around its ultimate path in the Senate and if this bill ever sees an actual vote, yesterday's actions in our view represent a very slippery slope around social media restrictions, First Amendment rights, and potential retaliatory actions China can head towards the likes of Apple and Tesla and US Big Tech,” Wedbush said of the matter.
The investment firm put its chips on a 25% chance that TikTok ultimately gets banned in the US and “faces an uphill battle” after yesterday’s House vote.
“In our view, this is all a game of high-stakes poker that has a broad negative ripple impact for US/China relations with a House Bill that remains a major head-scratcher,” warned the firm..
Washington has long expressed data privacy fears over TikTok’s 150 million US users, including potential violations of the US Children's Online Privacy Protection Act.
In March 2023, the FBI opened an investigation into parent company ByteDance’s use of TikTok to spy on journalists.
If the Senate ends up approving the bill? ByteDance will have six months to divest TikTok’s US operations to an approved entity or face being scrubbed from Google and Apple app stores for good.
Who’d like to buy TikTok?
Would TikTok even find a willing buyer if ByteDance if forced to divest?
Wedbush stated: “While the price tag will be eye-popping, TikTok's strategic value and consumer platform will have a number of financial and tech strategic players interested IF a sale becomes the formal path.”
Tech giants including Apple and Microsoft could also emerge as potential suitors, Wedbush predicted.
Earlier today, former US Treasury Secretary Steven Mnuchin raised the prospect of buying TikTok alongside a group of fellow investors.
Calling TikTok "a great business,” Mnuchin told CNBC's Squawk Box that, “I think the legislation should pass and I think it should be sold”.
But ByteDance would likely bring legal challenges to the ban, which would inevitably delay the forced divestment.
There is also the issue of IP.
“At the heart of the issue, China/Bytedance will never allow the source code to be sold to a US tech company in our view which makes this all a spider web issue for any potential strategic buyer,” said Wedbush.
After courting controversy for years, a total TikTok ban in the US has become a very real prospect.
The clock is ticking for ByteDance to play its next move.