ByteDance plans to establish a new company based in the United States to manage the global activity of the TikTok app, with Oracle investing as a minority shareholder, according to the plan presented to US officials to avoid President Trump’s ban on the popular video app.
And as mentioned Financial Times, the new arrangement will establish a separate corporate entity for the application, with Oracle taking a minority stake.
As part of the proposal, Oracle would have a stake in TikTok in its entirety, not just US operations, while ByteDance would be the largest shareholder in the new entity.
Setting up a new entity shows how ByteDance is trying to put a distance between the company’s Chinese ownership and TikTok operations, even as it seeks to avoid a full sale of the app.
Oracle ensures that data from American users is stored and processed in the United States, in accordance with recommendations of the United States Foreign Investment Commission (CFIUS).
TikTok was headquartered in California, with my name independent from ByteDance in China.
The main change the deal brought in is Oracle’s minority stake in the company, whose size remains unclear.
While Oracle’s stake makes TikTok a more legally distinct company, the resulting company is still likely to rely on algorithms and applications developed in China.
TikTok has committed to increasing hiring within the US, and in an interview with CNBC, Treasury Secretary Steven Mnuchin described the deal as part of a broader effort to establish TikTok as a US-based company.
It is also unclear whether the new agreement will lead to changes in how TikTok operates, or that it will purposefully address the security concerns that were the first motivation behind the proposed ban.
“The deal in which Oracle takes over the hosting without the source code and significant operational changes will not address any of the legitimate concerns about TikTok,” former Facebook security chief Alex Stamos said via Twitter.
The Oracle deal was announced on Sunday, and is part of an effort to prevent the app from being banned in the United States, as President Trump has threatened.
The president has yet to formally approve the deal, and according to the Financial Times, crucial details are still being worked out.
The agreement’s national security restrictions also drew criticism from Trump’s fellow Republicans, with Senator Josh Hawley urging Mnuchin to oppose the deal in an open letter Monday.
Hawley writes: An ongoing partnership that allows anything other than the complete liberation of the TikTok program from potential Chinese Communist Party control is completely unacceptable, and is completely inconsistent with the President’s Executive Order of August 6.