TikTok has announced a significant restructuring of its operations in the United States, transferring majority control to a consortium that includes the US tech company Oracle, private equity firm Silver Lake, and Abu Dhabi-based MGX. This decision aims to circumvent a potential ban in the country, which had been looming due to concerns over data privacy and national security.
The agreement establishes a new joint venture where the three managing investors will each hold a 15 percent stake, collectively controlling nearly half of the entity. Existing investors affiliated with TikTok’s parent company, ByteDance, will retain 30.1 percent, while ByteDance itself will hold 19.9 percent. According to a memo from TikTok CEO Shou Zi Chew, the new venture will be “majority owned by American investors” and governed by a seven-member board comprised primarily of US members. This governance structure is intended to enhance the protection of American user data and bolster US national security.
Under the new arrangement, the US entity will take charge of user data protection, content moderation, and algorithm integrity. TikTok plans to retrain its content recommendation algorithm based on US user data to ensure that the feed remains “free from outside manipulation,” as outlined in Chew’s memo.
Details of the Joint Venture and Compliance Measures
The restructuring culminates nearly a year of negotiations and regulatory scrutiny. Former President Donald Trump initially delayed a ban on TikTok, signing an executive order on January 20, 2021, that postponed the prohibition for 75 days. Subsequent extensions followed in April, June, and September, ultimately leading to a deal that satisfied governmental concerns.
As part of the new structure, Oracle will not only serve as a managing investor but will also act as the “trusted security partner.” This role entails auditing and validating TikTok’s operations in the US to ensure compliance with national security requirements. Sensitive data from approximately 170 million TikTok users in the US will be housed in Oracle’s data centers located within the country.
The valuation of the new entity has been estimated at $14 billion, according to US Vice President JD Vance. This figure reflects the significant financial implications of the deal and the ongoing importance of TikTok in the social media landscape.
The restructuring signifies a pivotal moment for TikTok as it navigates regulatory challenges while attempting to maintain its user base and market presence in the US. With this new framework in place, the platform aims to ensure compliance with both US regulations and user expectations regarding data security and content integrity.
