TikTok has struck a deal to form a joint venture with US and Gulf investors in a bid to resolve longstanding national security concerns and avoid a ban in the United States, five years after then-president Donald Trump first threatened to block the video-sharing app.
Under the terms of the deal, TikTok’s Beijing-based parent ByteDance will retain a minority stake, while operational control of the platform’s US data protection, algorithm oversight and content moderation will be transferred to the newly formed venture.
Following protracted negotiations involving both the Trump and Biden administrations, Oracle Corp (NYSE:ORCLC), Silver Lake and Abu Dhabi technology investor MGX each take 15%, in an agreement expected to value the US business at $14 billion.
Oracle, whose shares jumped 4.7% in premarket trading, will assume responsibility for retraining TikTok’s recommendation algorithm using US-based data, part of an effort to ensure the content feed is insulated from foreign influence.
The underlying algorithm will still be owned by ByteDance, which will retain a 19.9% stake in the US business, the maximum allowable under US foreign ownership rules.
Other existing ByteDance investors will hold 30.1%, with the remaining 5% to be allocated to new US investors.
TikTok chief executive Shou Zi Chew told staff the new entity would operate independently, building on the existing US Data Security structure, while ByteDance would continue to oversee commercial operations including advertising and e-commerce.
A seven-member board of directors, mostly Americans, will oversee the new US business, according to the memo, which was first reported by Axios.
In 2020, Oracle was chosen as TikTok’s secure cloud technology provider. Later that year, the Biden administration announced that ByteDance had agreed to resolve the outstanding issues, including Oracle and Walmart investing to acquire 20% of the newly formed TikTok Global business.