[UPDATE: The Trump administration delayed the download ban on TikTok in the U.S. by one week, pushing it to Sept. 27.]
Oracle said it will take a 12.5% stake in the new TikTok Global, a U.S.-based entity formed from the Trump administration’s demand that ByteDance, the popular video app’s Chinese parent company, divest TikTok’s U.S. operations to American owners.
Oracle confirmed plans to take the ownership stake in TikTok shortly after President Trump said Saturday that he approved the deal “in concept.” Oracle chairman and CTO Larry Ellison is a public supporter of Trump and held a fundraiser for the president earlier this year at the software mogul’s Rancho Mirage, Calif., home. Meanwhile, Oracle CEO Safra Catz was part of Trump’s transition team after the mogul-reality TV star was elected president in 2016. As a part of the agreement with Beijing-based internet giant ByteDance TikTok Global will run its app business on the Oracle Cloud, according to Catz.
Walmart’s investment will give it a 7.5% stake in TikTok Global. Under the partnership with the video app company, the retailing giant “will bring its omni-channel retail capabilities including its Walmart.com assortment, ecommerce marketplace, fulfillment, payment and measurement-as-a-service advertising service” to TikTok, Walmart said.
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TikTok Global will be majority-owned by American investors, including Oracle, Walmart, and four VC firms, which are each existing ByteDance investors: Susquehanna International Group, General Atlantic, Sequoia Capital and Coatue Management. TikTok Global will be an independent American company, with four American citizens out of the five member board of directors, according to a joint statement from Oracle and Walmart. (They did not identify prospective board members.)
The new TikTok Global will “pay more than $5 billion in new tax dollars to the U.S. Treasury,” according to the Oracle-Walmart statement. It’s not clear if that will be a one-time payment or if that’s tax revenue from the new company’s regular course of business. Oracle and Walmart reps did not immediately respond to a request seeking clarification.
TikTok Global will launch an initial public offering within 12 months and be listed on a U.S. stock exchange, the companies said.
Other financial terms of the pact were not disclosed.
TikTok confirmed Oracle and Walmart will take up to a 20% combined stake in a pre-IPO financing round for TikTok Global. “We are pleased that the proposal by TikTok, Oracle and Walmart will resolve the security concerns of the U.S. administration and settle questions around TikTok’s future in the U.S.,” the app company said.
Walmart had previously been allied with Microsoft, whose bid for TikTok was rejected by ByteDance.
With the tentative deal approval, the Commerce Department postponed the order banning American businesses from working with TikTok from Sept. 20 until Sept. 27.
Oracle said that all TikTok technology will be in possession of TikTok Global, which will “comply with U.S. laws and privacy regulations.” The Trump administration had claimed national security concerns — citing the hypothetical scenario of Chinese government authorities gaining access to data on TikTok’s U.S. users — were the impetus for the president’s order mandating ByteDance give up control of TikTok.
“Data privacy for 100 million American TikTok users will be quickly established by moving all American data to Oracle’s Generation 2 Cloud data centers, the most secure cloud data centers in the world,” Oracle said.
TikTok said it will “maintain and expand” its U.S. headquarters, with plans to “bring 25,000 jobs across the country.” According to TikTok, it currently employs about 1,500 U.S. workers. Trump had told reporters earlier Saturday that TikTok Global would likely have its new HQ in Texas.
The TikTok-Oracle-Walmart deal still needs approval by the Chinese government. ByteDance will continue to maintain control over the artificial-intelligence algorithms that power the TikTok app’s video recommendations.
“Oracle will quickly deploy, rapidly scale, and operate TikTok systems in the Oracle Cloud. We are 100% confident in our ability to deliver a highly secure environment to TikTok and ensure data privacy to TikTok’s American users, and users throughout the world,” Catz said in a statement. “This greatly improved security and guaranteed privacy will enable the continued rapid growth of the TikTok user community to benefit all stakeholders.”
According to Oracle, TikTok decision to partner with the business software and cloud provider “was heavily influenced by Zoom’s recent success in moving a large portion of its video conferencing capacity to the Oracle Public Cloud.”
In a statement, Ellison said, “TikTok picked Oracle’s new Generation 2 Cloud infrastructure because it’s much faster, more reliable and more secure than the first-generation technology currently offered by all the other major cloud providers.” He didn’t explain how Oracle’s cloud platform is “more secure” (or faster and more reliable) than rivals like Amazon’s AWS and Microsoft’s Azure.
As part of the transaction, TikTok Global will create an “educational initiative to develop and deliver an AI-driven online video curriculum to teach children from inner cities to the suburbs, a variety of courses from basic reading and math to science, history and computer engineering,” Oracle and Walmart said. Trump had previously told reporters that TikTok was donating $5 billion to an “education fund” that represented the “contribution that I’ve been asking for.” It’s possible Trump was confusing the education fund with the $5 billion in tax payments promised by the proposed U.S. owners of TikTok Global.
Several times within the last two months, Trump asserted that the U.S. government deserved some kind of big payment for enabling TikTok’s transfer to American interests. This week, he said his advisers had informed him that it was illegal to demand a payment from transaction. “Amazingly, I find that you’re not allowed to do that,” Trump said at a press briefing Wednesday. His administration is forcing ByteDance to complete a deal to sell TikTok’s U.S. business operations by Nov. 12 to American entities or face the total disabling of TikTok.
“Nobody has ever said, ‘Well, we’ll approve the deal, but we want a lot of money to go to the government because by approving the deal, we’re making the deal valuable,'” Trump said Sept. 16. “They’ve never heard of that before. Okay? Can you believe that? Right? Hard to believe.”
TikTok claims to have 100 million users in the U.S., and millions more in other countries. It isn’t available in China, where ByteDance offers a similar app called Douyin that shares must of the same back-end technology used by TikTok, while India has banned TikTok and other Chinese-owned apps.
“We’re delighted that the individuals who’ve turned their creativity on TikTok into thriving careers, the small businesses using TikTok to reach customers during the pandemic, and the families who’ve found joy and connection through our platform will be able to use TikTok for many years to come,” TikTok said.
Still to be determined is who will lead TikTok Global as CEO.
TikTok is currently headed on an interim basis by Vanessa Pappas, previously GM for North America, Australia and New Zealand. She stepped into the role after ex-CEO Kevin Mayer last month said he would resign just over three months after leaving his high-ranking post at Disney, citing the current political climate surrounding TikTok amid growing tensions in China-U.S. relations. Kevin Systrom, co-founder and former CEO of Instagram had been approached about the TikTok CEO job, the New York Times reported.