UPDATE: The Trump administration has delayed the download ban on TikTok in the U.S. by one week, pushing it to Sept. 27.
Earlier: President Trump said he approved in principle the deal under which Oracle and Walmart would receive ownership stakes in Chinese-owned app TikTok. His remarks come a day before his administration’s ban on TikTok app downloads in the U.S. is set to go into effect — which TikTok filed a last-minute suit seeking to stop.
“I have given the deal my blessing,” Trump told reporters Saturday at the White House. “If they get it done that’s great. If they don’t, that’s fine too.” He added, “I approved the deal in concept.”
Trump said the new U.S.-based TikTok entity — to be called TikTok Global — will be located “most likely in Texas” and will hire at least 25,000 new workers. TikTok says it has about 1,500 U.S. employees currently.
TikTok Global, according to Trump, has agreed to set up a $5 billion “education fund.” Trump had previously asserted that the U.S. government deserved to be paid some kind of substantial fee for enabling TikTok’s transfer to American interests. But he said earlier this week his advisers had told him that it was illegal to demand a payment from transaction, which his administration is forcing ByteDance to conclude by Nov. 12 or face the total disabling of TikTok. About the supposed $5 billion TikTok education fund, Trump said, “That’s their contribution that I’ve been asking for.”
“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.,” TIkTok said in a statement.
Oracle said it would take a 12.5% stake in TokTok Global. According to TikTok both Oracle and Walmart will “take part in a TikTok Global pre-IPO financing round” in which they can take up to a 20% cumulative stake in the company.
At this point, the deal would still need approval from the Treasury Department-led Committee on Foreign Investment in the United States, as well as Chinese authorities.
Meanwhile, TikTok late Friday filed an 11th-hour lawsuit seeking an injunction stopping the Commerce Department’s decree that TikTok (and another Chinese-owned app, WeChat) would no longer be allowed to be downloaded from app stores after 11:59 p.m. on Sunday, the Wall Street Journal reported.
In the lawsuit, TikTok alleged that the Trump administration has denied the app’s owners due process of law, and again asserted that the president took the actions “for political reasons rather than because of any ‘unusual and extraordinary threat’ to the United States.” The lawsuit Friday, filed in federal district court in Washington, D.C., makes similar arguments to TikTok’s Aug. 24 lawsuit seeking to block the Trump ban.
As a separate entity, TikTok would file for an IPO on a U.S. stock exchange within a year after majority control is transferred from ByteDance to U.S.-based interests, according to media reports. In addition, TikTok would be required to appoint a board of directors entirely comprised of U.S. citizens.
On Monday, Oracle confirmed it reached a deal to be the “trusted technology provider” in the U.S. for TikTok. Oracle is headed by chairman Larry Ellison, who is an open Trump backer. Under the partnership, Oracle would reportedly receive a 20% equity stake in the company. It’s not known what kind of stake Walmart might receive.
Under the new U.S. ownership structure, ByteDance would retain control over the artificial-intelligence technology that powers TikTok’s video recommendations. Last month, China’s government adopted new trade regulations on companies based in the Middle Kingdom restricting the export of AI technology, adding another complication to the potential TikTok deal.
Free-speech advocates have criticized the Trump administration’s ban on TikTok and WeChat, saying it violated the First Amendment rights of U.S. users of those apps. The U.S. government has invoked national security concerns for the action, saying the Chinese government could potentially force the app companies to turn over data on Americans. But industry experts (and the companies themselves) have noted there’s no evidence that this has ever happened.