Legislation that could eventually require the sale of TikTok is moving forward. But any kind of divestment by its Chinese parent company, ByteDance, is likely to prove challenging.
The House on Wednesday passed the bill to ban TikTok unless ByteDance sells the app to a buyer the government approves. The bill would still need to be approved by the Senate and signed into law by the president. Assuming that happens, however, the options for potential buyers would be extremely limited, a potential spinoff presents many difficulties, and the Chinese government or U.S. regulators could try to block any of those options.
This is what you should know.
What type of sale is required according to the invoice?
To avoid a ban, ByteDance would have to arrange a sale that ensured TikTok was not under the control of a foreign adversary (a group that includes China) within six months. ByteDance was unable to maintain any relationship with the newly independent app or control over its algorithm, which sends users a feed of videos tailored to their interests.
Under the legislation, the president must accept that the sale meets those conditions.
What exactly would be up for sale?
ByteDance and TikTok have not said how they would handle a sale, if one were necessary. But legal experts say that in the event of a sale, ByteDance would likely have to decide between selling all of TikTok globally or trying to cordon off its business in the United States.
ByteDance will not be allowed to have any connection with TikTok in the future. So it's not clear if it would even be It is possible to discontinue its US operations to comply with legislation while allowing the US version of the app to use ByteDance's algorithm and talk to TikTok users in other countries.
Why would it be a challenge to sell TikTok?
Even just the US part of TikTok would be expensive, with some analysts estimating it could be worth more than $50 billion.
That likely makes it too expensive for a competitor like Snap. tech giants that can afford it, like Google or Microsoft, are likely to face antitrust concerns over continued growth.
A group of investors could also come together to raise the money needed to buy the app.
ByteDance could also pursue an alternative route, such as turning the app into an independent public company by offering shares on the stock market.
Sen. Mark Warner, a Virginia Democrat who chairs the Intelligence Committee and has supported the new legislation, said in an interview that divestment could involve a partnership between the United States and its allies.
“It would be great if it was an American company,” he said. “But if it wasn't an American company, it could be a joint venture between an American company and a European company.”
What could hinder a sale?
If the bill becomes law, ByteDance is likely to challenge its legality in US courts. China could also try to block the sale of the app.
Early Wednesday, the Chinese government criticized the legislation even before it passed the House, saying the U.S. government was “resorting to hegemonic measures when fair competition could not succeed.” And it is not the first time that Beijing has signaled that it could intervene. In 2020, when former President Donald J. Trump tried to force ByteDance to sell TikTok, China imposed export restrictions on technology that sounded like TikTok's content recommendation algorithm.
At the time, both Oracle and Walmart appeared willing to buy stakes in the company, but the deal never materialized.
Regulators may also make it difficult for a US company to buy TikTok. The European Union and the Biden administration have repeatedly challenged acquisitions of big tech companies such as Microsoft, Amazon, Google and Meta, which owns Facebook and Instagram, using antitrust laws.
Has a fire sale like this ever happened?
Yes. During the Trump administration, the government forced a Chinese company to sell the dating app Grindr. Officials were concerned that the app, which includes a field for users to show their HIV status, could expose sensitive information about Americans to China. A group of investors ultimately purchased Grindr from its Chinese owner, Beijing Kunlun tech, for more than $600 million.
But TikTok operates on a much larger scale than Grindr, with 170 million users in the United States alone. If ByteDance is forced to sell the app, it will be a major escalation in a digital cold war between the United States and China over who controls critical technology.
