TikTok is unlikely to face a ban in the United States, according to media industry insiders and analysts, despite the House of Representatives overwhelmingly supporting a bill on Wednesday that would prohibit the app if its owner refuses to sell its stake.
The House on Wednesday passed legislation that would see the popular video-sharing social media app banned if its Beijing-based parent company ByteDance fails to divest its US TikTok operations to a non-Chinese entity.
The bill will now progress to the Senate for approval. President Joe Biden has said he would approve the bill if it passed Congress.
If signed into law, ByteDance would have 180 days to divest its assets and, if not, it would be illegal for app store operators such as Apple Inc (NASDAQ:AAPL, ETR:APC) and Alphabet Inc (NASDAQ:GOOG)-owned Google to make it available, facing fines and other penalties.
A US TikTok ban is not anticipated to become a reality and if it does, it won’t last long, Vertiqal Studios (TSX:VRTS, OTCQB:GAMGF) CEO Jon Dwyer believes.
Vertiqal Studios (TSX:VRTS, OTCQB:GAMGF) specializes in creating branded video content which it distributes to its network of more than 43 million followers across social media platforms including TikTok, Snapchat, and Instagram.
'Punitive and painful'
“Every minute that goes by would be a loss in advertising dollars. It would diminish the value of the asset so even ByteDance, who is being forced to sell, will not let its value go to zero,” Dwyer said.
“A ban would be punitive and painful, including for ordinary Americans and American businesses, but it’s going to cause that transaction to happen. I believe this is going to end in a transaction where [TikTok] shares are no longer held by bad actors in bad actor states.”
Dwyer told Proactive that the forced sale of TikTok from ByteDance to another entity would remove the “geopolitical overhang” which is currently limiting its valuation.
He pointed out that TikTok’s valuation currently stands at about $250 billion but is projected to surge to between $750 billion to $1.2 trillion in the absence of geopolitical risk.
The CEO added that Vertiqal Studios (TSX:VRTS, OTCQB:GAMGF) will continue to provide updates to the market about the work is carrying out for its clients, having been hired by big-name brands exclusively to grow on TikTok, not other social media platforms.
And, in the long run, he doesn’t see this “speed bump” diminishing the value of Vertiqal Studios' owned-and-operated TikTok channels -- he sees their value growing.
“The real money going into TikTok from American-as-apple-pie brands who are no longer funnelling money into the programmatic tentacles of Meta Platforms Inc (NASDAQ:META, ETR:FB2A, SWX:FB) is still to come,” he told Proactive.
“Americans are transacting on TikTok with TikTok shop in the way they do on Amazon.com Inc (NASDAQ:AMZN, ETR:AMZ), and I think that it’s about to become a vehicle that is so unique. So it’s better to confront this issue now rather than when the company is so much more developed.”
TikTok bill faces uphill battle: analysts
Jefferies analysts believe there is a less than 10% chance that TikTok will be banned in the US and, if the app remains available, do not foresee any impact on the app’s commercial relationship with cloud services provider Oracle Corp (NYSE:ORCL, ETR:ORC), which manages TikTok’s US data storage.
“We believe there is an 80%-plus chance that TikTok continues to operate in the US but potentially underneath a different ownership structure, a 10% chance other tech buyers could step in and take part of the relationship away from Oracle, and a less than 10% chance that the service is shut down entirely,” they wrote in a note to clients.
Meanwhile, analysts at Wedbush only see a 25% chance of TikTok ultimately being banned in the US.
They see the legislation facing an uphill battle after the House approval and believe it represents a “slippery slope” around social media restrictions, First Amendment rights, and potential retaliatory actions from China.
Going into the US presidential election, they also see a potential ban as having a major impact on Meta, Google, and Snap Inc (NYSE:SNAP).
“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,” they wrote.