Model Citizen and Sandwire CEO Adam Schwam on TikTok

Microsoft is considering buying a bigger chunk of fast-growing social media giant TikTok. According to a report in The Financial Times, Microsoft has discussed the possibility of buying TikTok’s business in Europe and India. Previously, Microsoft had expressed an interest in TikTok’s business in the U.S., Canada, New Zealand, and Australia.

TikTok’s U.S. business claims about 100 million users and could be valued in the range of $20 billion to $50 billion. By including the European and Indian operations to the mix would obviously boost that price tag. TikTok, a unit of Beijing-based ByteDance, does not operate in China.

President Donald Trump imposed a Sept. 15 deadline on a TikTok acquisition, threatening to shut down the platform for short-form video montages in the U.S. if a deal is not completed. He’s also demanded payment to the U.S. government as part of the deal. “It’s probably easier to buy the whole thing than to buy 30% of it,” Trump said Monday. “How do you buy 30%? Who’s going to get the name? The name is hot. The brand is hot … my personal opinion is you’re probably better off buying the whole thing. I think buying 30% is complicated.”

In a statement recently, Microsoft said it would move quickly to negotiate with ByteDance. “During this process, Microsoft looks forward to continuing dialogue with the United States Government, including with the President,” the company wrote.
The Financial Times, citing five people with knowledge of the deal, reported (subscription required) that Microsoft is interested in TikTok’s entire global business due to the complexity of separating back-end functions. A full acquisition would also allow users to seamlessly use the app between countries. Microsoft can afford a bigger acquisition. Its market value stands at $1.6 trillion, and its cash, short-term investments stood at $136 billion as of June 30. The company’s largest acquisition to date was the $26.2 billion acquisition of business social media network LinkedIn in 2016.But the deal for TikTok’s U.S. business is facing new hurdles as Washington’s deadline for a sale approaches, putting the app in danger of facing an effective ban.
An announcement of a deal had been expected as soon as Tuesday, CNBC previously reported, but that day came and went with no news of a transaction.

Chinese officials introduced new restrictions on technology exports that could require Chinese approval for TikTok to sell its algorithm, which is part of the core value of the app. As of Monday, Oracle and a joint bid from Microsoft and Walmart were the top contenders for the sale, but The Wall Street Journal reported late Tuesday that China’s new restrictions had complicated and extended the talks. A deal with the algorithm had been expected to fall in the $20 billion to $30 billion range, sources previously told CNBC. That price would likely drop if the key technology could not be included.

The new rules out of China have prompted Zhang Yiming, founder of TikTok’s parent company ByteDance, to reconsider his options, Bloomberg reported Tuesday. The need for approval from officials in the U.S. and China could push the deal past the November U.S. presidential election, a source familiar with the matter told Bloomberg.

ByteDance and the companies seeking to buy TikTok’s U.S. business are considering four options to navigate the new restrictions from China, Reuters reported Wednesday, citing sources familiar with the matter.The first option is to sell TikTok without the algorithm, potentially expediting the sale but requiring the new owner to inject an alternative into the app. The second option is to negotiate an up to a year-long transition period with the Committee on Foreign Investment in the United States (CFIUS), though its unclear if China’s rules would allow this in the required time frame.
The third option is to seek approval from China to sell the algorithm to the chosen U.S. company.

The fourth option is for the new buyer to license TikTok’s algorithm from ByteDance. However, it’s unclear if U.S. authorities would be content with any continuing relationship between TikTok and the China-based ByteDance after the sale. If deal talks extend into November or later, the app could face an effective ban in the U.S. under President Donald Trump’s executive orders. Trump initially signed an order that would bar U.S. businesses from transacting with ByteDance as of Sept. 20, and later signed an order forcing ByteDance to sell or spin off its U.S. TikTok business by Nov. 12.

A potential change in administrations after Election Day could give TikTok another chance to negotiate with the U.S. government. TikTok has sued the Trump administration over the ban, claiming it denied the company due process.

So what does this mean to the enthusiastic users of the TikTok App? Well, really not that much as unlike in dictatorships we do not really have the ability to close off the internet to users. That is part of the purpose of the Internet to allow many paths to the same data and redundancy. So it is unlikely that you will wake up one day and lose your favorite social media app. Also, note that Microsoft has not always been the best player in the sandbox, and giving them too much control of social media may not be the best idea either.

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