Will TikTok Global majority owned by American or Chinese? Will ByteDance have any ownership?

21 Sep, 2020 23:04
source: Singularity Financial

Singularity Financial Hong Kong September 21, 2020 – An envisioned new company consisting of the U.S. operations of the popular TikTok video app would be majority-owned by Chinese parent ByteDance Ltd. but controlled by a board of American executives from the likes of Sequoia Capital and Walmart Inc., a source with knowledge of the situation told Chinese local media Caixin.

According to a report from Caixin, the arrangement that would see the new company’s majority equity controlled by a Chinese owner while management control rested in the hands of U.S. executives is similar to a reverse situation used by most Chinese companies that list in the U.S. Such arrangements allow for diversified ownership of companies from sensitive sectors, while keeping management control squarely in the hands of local executives.

Will TikTok Global majority owned by American or Chinese?

Following the weekend’s announcement that Oracle will take a 12.5% stake in TikTok, and run cloud services and security for the app;  Walmart, which said over the weekend that it will take a 7.5% stake in TikTok, U.S. President Donald Trump on Monday said that Oracle and Walmart will have “total control” over TikTok Global, a company to be formed if a deal between Oracle, Walmart and TikTok’s parent company ByteDance is approved.

Americans will hold four out of the five seats on TikTok Global’s board, with ByteDance’s CEO holding the fifth seat. People familiar with the deal said that they think TikTok Global will be 53% American-owned if you count the American investors that own 41% of ByteDance along with Oracle and Walmart’s stakes.

Oracle and Walmart don’t view ByteDance as an entity as having a stake in TikTok Global. Instead, they view ByteDance’s individual shareholders as the ones with stake.

“ByteDance isn’t separating its American VC investors from the rest of its stakeholders, which is why it said it will own 80% of TikTok Global if the current deal goes through. Moreover, ByteDance’s CEO and founder Zhang Yiming, who also owns a stake, will have a TikTok Global board seat, so there will at least be some governance coming from ByteDance’s point of view, even if Yiming is outnumbered on the board four to one.” a CNBC’s report shared its view about ByteDance.

Will ByteDance have any ownership over TikTok Global?

Oracle’s Executive Vice President Ken Glueck released a statement and stated TikTok’s Chinese parent company ByteDance will “have no ownership” over TikTok Global.

“Upon creation of TikTok Global, Oracle/Walmart will make their investment, and the TikTok Global shares will be distributed to their owners. Americans will be the majority and ByteDance will have no ownership in TikTok Global,” Glueck’s statement said.

The bottom line

To share what CNBC’s final touch on the issue, Trump was wrong when he said on Fox News on Monday that Oracle and Walmart will have total control of TikTok Global, even if you count the U.S. investors in ByteDance.

Specifically, Americans will have a 4-1 majority on the board of TikTok Global, while ByteDance shareholders — which include American, Chinese and international investors — will own a majority of shares in the company. Oracle will own 12.5% of TikTok Global, and Walmart will own 7.5%. ByteDance retains some control over the product’s core intellectual property.

In other words, Americans will not have total control of the company from a governance, ownership, or technology standpoint.

The Chinese government will still have to approve the deal, but people familiar with the deal said they expect China to approve it because they believe it’s structured to work around the latest tech export latest rules.