5./15 WEST/iStock Unpublished via Getty Images
Goal (NASDAQ:META) and Google (NASDAQ:GOOG) (NASDAQ:GOOGL) will seek to reap the maximum benefit if bills targeting TikTok's U.S. operations become law, according to Wedbush Securities.
Analyst Scott Devitt and others at the investment firm recently sat down with the former U.S. congressman. Ryan Costello to discuss the implications of the Protecting Americans from Solicitations Controlled by Foreign Adversaries Act (HR 7521). Costello, who was in Congress from 2015 to 2019, estimated that there is a 55% chance that some type of legislation will eventually be passed. However, he doubts China-based ByteDance (BDNCE) would divest from TikTok, as required by legislation, ultimately resulting in TikTok being forced to leave the country.
HR 7521 passed the U.S. House of Representatives on March 13, receiving broad bipartisan support with a vote of 352-65-1 in favor of the bill.
President Biden has already indicated that he will sign HR 7521 if it reaches his desk.
He bill targets the “threat posed by applications controlled by foreign adversaries, such as TikTok and any successor applications or services and any other applications or services developed or provided by ByteDance.”
“This bipartisan legislation is necessary to protect our national security and the privacy of American consumers.” saying U.S. Congresswoman Shontel Brown (D-Ohio). “There are clear and legitimate concerns about apps subject to control by our foreign adversaries. It is imperative that Congress take action to protect the public, both young and old.”
A week after the House passed HR 7521, the legislature passed a second bill, the Protecting Americans' Data from Foreign Adversaries Act of 2024 (HR 7520), unanimously.
HR 7520, which is related to HR 7521, would prohibit data brokers from selling sensitive personal information of Americans to foreign adversaries.
The Senate takes the reins
The U.S. Senate is expected to review both bills together, and will be voted on within the next two months, Costello said.
However, these bills will likely be amended before they reach the Senate, Costello said. For example, more clarification may be needed regarding the definition of “foreign adversary” or the term “data broker” may need further classification, the former congressman said.
Additionally, the House version requires TikTok to divest ByteDance within 180 days. This timeline is likely unreasonable for a deal of this size and complexity and will likely be modified by the Senate, Costello said.
“If the bill is delayed until the summer or early fall months, it is unlikely to pass, in Ryan's view, given the upcoming election and the difficulty of maintaining the necessary political momentum over such a long period of time,” Wedbush noted.
Meta and Google ready to reap the spoils
If the two bills become law, ByteDance and the Chinese government have indicated resistance to divesting from TikTok, used by approximately 170 million Americans.
Should TikTok be forced to leave the United States, Meta and Google are the two companies best positioned to benefit from the redistribution of advertising, Wedbush said.
“Of the people who use TikTok, 83%, 81% and 73% also use Facebook, Instagram and WhatsApp, respectively,” said Searching Alpha analyst Yuval Rotem. “From the opposite angle, 51%, 52% and 50% of the people who use Facebook, Instagram and WhatsApp are also on TikTok.”
“In my opinion, this means that in the event of a TikTok ban, the time users spend on Meta platforms will increase significantly,” he added.
