Beijing-based ByteDance has until Sept. 15 to find a buyer for the U.S. arm of its TikTok short video app. Days before the deadline set by the Trump administration, this is the only certainty in a sale process marked by conflicting accounts, changing bidding groups, internal disagreements and shifting alliances.
Complicating the matter is a landscape in which the key players face a new set of rules that appear both mutually contradictory and ambiguous.
It remains unclear if an agreement can be reached on a sale at all within such a time frame, increasing the likelihood that the popular app will be banned in the U.S. weeks later. Current and future bidders include some of the world's most powerful and influential technology and investment companies.
At stake is TikTok's growing U.S. operation, currently valued at up to $30 billion. With so much growth potential, watching this drama play out makes for one of the most compelling spectator sports in the financial world today.
"Nobody can say today how it will get resolved," said one investor still working out how to join the fray. "There is so much value riding on the outcome, and yet it could all go up in smoke." A successful sale depends on putting together a buying group for TikTok that can satisfy varying constituencies, many with diametrically opposed interests.
The immediate challenge is to satisfy U.S. regulators with the Committee on Foreign Investment in the United States, or CFIUS, the agency that screens foreign investments for potential threats to U.S. national security. It has already determined that the app may be a threat to data privacy.
CFIUS scrutiny used to be a technical matter but has become increasingly political. That means a bottom-up process competing with top-down scrutiny driven by the committee's chairman, U.S. Treasury Secretary Steve Mnuchin, who takes his instructions from the White House.
As talks continue between CFIUS, ByteDance, investors including Sequoia and General Atlantic, and the tech companies that alone can provide assurances on certifying data protection, CFIUS' position has hardened considerably, according to several participants in the discussions. "After the Indian government banned TikTok, the attitude of CFIUS metastasized," said one deeply involved investor.
So what was acceptable to CFIUS in the past -- including a deal in which Sequoia, GA and Coatue joined forces with one of the tech companies -- has become less so. Some say those investors are definitely out of any bidding group, while others say the situation remains fluid.
CFIUS is still not speaking with one voice. So far, Microsoft and Oracle are the only "Big Tech" companies at the table. Those involved say only such a company can satisfy Mnuchin and the Trump administration's demand for guarantees on the security of TikTok data. But other tech companies have not shown up, either, because they lack the political goodwill or are uncomfortable with the business risk.
While Microsoft has positive China connections of its own, including a profitable business there and strong ties to ByteDance founder Zhang Yiming, U.S. regulators see that as a potential drawback. Despite its X-Box gaming business, Microsoft lacks solid DNA when it comes to the consumer internet. Meanwhile, Oracle, which has even less consumer DNA, compensates through its relative proximity to the White House.
Could other players enter the bidding? Google would raise antitrust concerns, given its YouTube business, which is why its exploration of a potential bid -- possibly with Walmart -- never went very far. What about Amazon?
ByteDance currently does not compete with Amazon, but Zhang has ambitions in that direction, especially a livestreaming e-commerce business. That makes him a potential competitor or collaborator for Amazon in third markets. Given the toxic politics in Washington, where President Donald Trump often criticizes The Washington Post, owned by Amazon CEO Jeff Bezos, Mnuchin is unlikely to look favorably on a TikTok-Amazon tie up.
Still, if there is no resolution by Sept. 15, and Joe Biden wins the November presidential election, the approval process at CFIUS would change dramatically. That, in turn, would mean that the group of companies now seen as hostile by the current administration would become the insiders in the next. TikTok is young enough in the U.S. that it could survive a ban, suspend operations for a few months and then spring back to life without too much damage.
One group that is unlikely to show up, ironically, is Disney, which is the company that best understands entertainment, said one senior Disney executive. Paranoid when it comes to any risks to its branding as a source of wholesome content, TikTok's sometimes edgy and family-inappropriate videos are a bridge too far for the entertainment giant. Moreover, Disney's revenue streams -- mainly theme parks and movies -- have been hard hit by the pandemic. Finally, it is struggling to absorb last year's $70 billion acquisition of 20th Century Fox.
Given all these crosscurrents, it seems unlikely that any definitive agreement can be reached in the coming days. And that was before Beijing announced that AI technologies such as the algorithms at the heart of ByteDance could only be exported or sold abroad with its express approval. The possibility that there will be any deal is receding by the day.