TikTok: US investors reportedly keen to buy Chinese-owned app to avert Trump ban

The community in our test countries has shown so much creativity in short-form video, and we’ve heard from creators and people around the world that they’re eager to get started as well
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© Provided by The Guardian Photograph: Florence Lo/Reuters

US tech investors are allegedly seeking to buy a majority stake in the Chinese-owned social media sensation TikTok to fend off the video-sharing app's security issues in the White House.

According to two sources, investors, led by the venture capital companies General Atlantic and Sequoia Capital, are said to be engaged in negotiations with US regulators about an opportunity to acquire the company.

In recent days, the re-election campaign by Donald Trump has posted advertisements on Facebook alleging that TikTok was "spying" on US users – ByteDance has refuted a suggestion by the parent company.

Although the White House is evaluating whether to take action against TikTok, factions within US state and justice departments are reportedly in favour of banning the software that sits on millions of Americans' smartphones.

Larry Kudlow, the top economic advisor to Donald Trump, said last week that there had been no decisions. Kudlow said that the Chinese holding company could "pull out" TikTok and "operate as an independent American company"

The organization said on Tuesday it plans to create 10,000 US jobs in the next three years, a dramatic rise in recruiting over the 1,400 workers it currently oversees following this year's tripling of its workforce.

Senate Democratic leader Chuck Schumer, as well as Republican senators Tom Cotton and Josh Hawley, expressed security concerns regarding data from U.S. customers making their way to the Chinese government after the announcement.

House lawmakers voted 336-71 Monday as part of a package of changes to the National Defense Authorization Act to ban TikTok from US government computers.

TikTok has tried to distance itself from Beijing as tensions grow between the US and China. TikTok had pulled out of Hong Kong earlier this month, shortly after it was blocked by India, and is looking to set up headquarters outside China. The corporation has recently recruited Disney veteran Kevin Mayer as its chief executive in the US and has beefed up lobbying activities.

But it's unclear what price investors will agree to pay for the company. ByteDance was estimated at $75bn in 2018 but it is not thought that TikTok will be profitable. Around the same time, months of Covid-19 pandemic freeze has significantly increased the app's downloads to over 2bn.

“It is young and it is early on in the monetisation process,” one potential investor told the FT. “But it is a unique asset.”

According to Sensor Tower, TikTok was downloaded 315 million times between January and March — beating every other app ever for a single fifth.

Separately, Facebook 's announced Thursday Instagram is planning to introduce Reels, a direct TikTok rival, specifically designed for short-form content in 15 seconds.

The US launch, scheduled for early August, comes only after Reels debuted in India shortly after TikTok was banned from that market. It was tested in Brazil, France and Germany too.

“The community in our test countries has shown so much creativity in short-form video, and we’ve heard from creators and people around the world that they’re eager to get started as well,” a Facebook spokesperson confirmed in a statement.