Microsoft negotiations to buy TikTok’s US operations trigger anger in China
A potential shotgun wedding to Microsoft for TikTok’s US operations caused an uproar on Chinese social media on Monday, as well as criticism from an influential Chinese investor in TikTok founder ByteDance.
The US tech giant officially announced its interest on Sunday after President Donald Trump, who cited national security threats posed by the Chinese-owned short video platform, overturned a proposed ban and gave the two companies 45 days to formulate a deal.
The proposed purchase of units of TikTok, which claims 100 million US users, will present Microsoft a remarkable chance to become a major rival to social networking giants like Facebook and Snap.
Shares of Microsoft, which owns the business social media network LinkedIn and also wants to purchase TikTok’s Canadian, Australian and New Zealand interests, increased almost 3 per cent in early Monday trading.
ByteDance has not confirmed the sale talks publicly. But in an internal letter to employees on Monday, the company’s founder and CEO Zhang Yiming said the firm had begun discussions with a tech company it did not specify to clear the way “for us to continue to offer the TikTok app in the US.”
Striking an agreement that will please all parties and potentially serve as a lightning rod for US-China relations will be a tough challenge.
Sources close to the situation have said that all of TikTok may be worth US$50 billion, but the US division’s forced selling and specific other units alone are expected to yield much less than that.
“A forced deal under the shotgun of Washington could open up for endless litigations if it should result (in) an adverse outcome to current private shareholders,” said Fred Hu, chairman of Primavera Capital Group, an investor in ByteDance and one of China’s best known private equity firms.
Hu said Microsoft was a trustworthy buyer but questioned whether selling significant parts of TikTok’s operations at such an early stage of its development could ever be a good deal for ByteDance.
“It absolutely makes no sense. Bytedance is an unfortunate victim of the crazy politics and insane geopolitics. It is a tragic outcome for Bytedance, for entrepreneurial capitalism, and for the future of global commerce,” he said.
Tech bankers in Asia said investment banks who are working on the deal should have to be careful not to antagonise Trump.
“This is not a typical M&A situation…this is hard to predict,” said one senior banker with a US bank in Hong Kong, adding that it would be a matter of how to structure an agreement in a way that would keep Washington satisfied.
Zhang’s letter to workers also said ByteDance disagreed with the position held by the Committee on Foreign Investment in the United States (CFIUS), which is scrutinising deals for national security threats, that it must completely divest US operations of TikTok.
“We disagree with this CFIUS conclusion,” the letter said but added: “…we accept the judgement in the current macro environment.”
ByteDance has not responded to requests for comment.
The Chinese government has refused to comment directly on Washington’s move to force a sale of TikTok’s US operations.
The United States has been “stretched the definition of national security”, presuming that businesses are guilty without evidence, China’s foreign ministry spokesman Wang Wenbin told a briefing after being questioned about US actions against Chinese tech firms.
One of the most debated subjects on China’s Twitter-like Weibo site on Monday was the subject “ByteDance has decided to divest TikTok’s U.S. activities,” with more than 920 million views.
Several analysts attacked ByteDance, claiming it didn’t show as much resilience as Huawei Technologies, still in the crosshairs of tensions between the U.S. and China, and now on a blacklist in U.S. companies.
“(ByteDance) kneeled down so quickly that it didn’t even wait for the response of the Chinese government,” said one tweet that had been ‘liked’ more than 5,000 times.
Although TikTok is the most well-known app for ByteDance worldwide, the company derives the majority of its sales from ads on Chinese apps like Douyin-a Chinese clone of TikTok-and Jinri Toutiao news aggregator app.