TikTok’s US operations will be housed in a new joint venture, according to a memo sent to employees by CEO Shou Zi Chew. The entity is named TikTok USDS Joint Venture LLC. As part of the venture, TikTok has signed agreements with the three managing investors: Oracle, Silver Lake, and Abu Dhabi-based MGX.
The users of Tik Tok in the US can now relax because a deal has been reached which will ensure that the app remains operational in the country. As reported by CNBC, ByteDance has settled on a new structure to lead the US business of Tik Tok into the hands of a group of investors headed by American firms.
Tik Tok CEO Shou Zi Chew has told the employees that the operations of the company in the US will be incorporated in a new company called Tik Tok USDS Joint Venture LLC. Such a structure enables TikTok to remain in business to its 170 million users in US and officially decouple American operations and direct control by ByteDance. The deal will become effective on January 22, a day before an executive order that suspended the application of the Protecting Americans from Foreign Adversary Controlled Applications Act expires.
The joint venture has entered into contracts with three managing investors as indicated in the internal memo of Chew, which include: Oracle, the private equity firm, Silver Lake, and the Abu Dhabi based investment firm, MGX. Although the group of investors can be said to be US led, the fact that MGX is involved implies that the ownership is not purely American. Nonetheless, this is generally the same group that US officials had earlier indicated that they would consent to grant during prior negotiations which had collapsed due to political and regulatory confusion.
With the ownership structure mentioned above, Oracle, Silver Lake, and MGX will own a total of approximately 45 percent of the new US entity. The current investors of ByteDance will be affiliates who will own around 30.1% with the remaining 19.9 by ByteDance. The new board structure will consist of seven directors, most of whom should be the US nationals, which will be operating under the company.
The algorithm of Tik Tok has always been one of the most sensitive aspects of the negotiations. The US officials have always complained that the ability to control the recommendation system may enable indirect control on what the users watch. In his communication to employees, Chew stated that the new US company will retrain the algorithm with the help of American user data to ensure that the feed cannot be manipulated externally. How that retraining will be practiced and to what extent it will be independent of the global systems of ByteDance will be seen.
