TikTok Oracle Deal: Confusion, Contradictions and Quest for Control

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Another day Another verbal volley. TikTok Oracle deal saga continues.

The tug-of-war with the back and forth statements surrounding the potential TikTok Oracle deal has reached a fever pitch now.

While the financial jargon around the deal continues to obfuscate many, it is being helped no less by the back to back statements made by both, the US administration and the Chinese counterpart.

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All the confusion starts with ByteDance announcement. After getting a blessing from Donal Trump on Saturday the Chinese company announced that would retain 80% of TikTok Global – the new company that is formed to control TikTok operations in the US.

In a scathing response to ByteDance’s attempts to clear the air, President Trump made it abundantly clear that he wouldn’t approve the deal if the Chinese company retains control of TikTok. Expecting the new venture to be controlled by Oracle, he also indicated that the Chinese influence must be diluted by a future public offering of the new company.

And again, Beijing wasted no time in putting out a counter with the China state-affiliated Global Times editor Hu-Xijin tweeting that Beijing would likely reject the deal “because the agreement would endanger China’s national security, interests and dignity.”

Beijing’s interference and renewed activity and interference may well contrive to be the undoing of the significant progress made by the two parties over the past month and a half.

While it is clear that neither ByteDance nor China wants to cede total control of the TikTok, one of the key reasons for discrepancies amongst those involved in the deal lies in the differing views over TikTok’s eventual shares.

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While ByteDance’s earlier statement claimed that it will continue to have 80% of the stake in the new TikTok Global, a more logical explanation is provided from the opposite American number. The statistic that’s been held up by both Oracle and Walmart is that American investors control more than 50% of the new TikTok Global.

The US investors already own a substantial chunk of ByteDance itself. American investors, which include General Atlantic and Coatue own close to 40% of the Chinese internet giant. Combined with Oracle and Walmart’s 20%, that brings U.S. investor control to more than half.

In order to comply with President’s wishes, TikTok Global could also go the super shares way, if nothing else comes to pass. It is entirely possible that a creative corporate structure could give Oracle outsized power. Leading tech companies like Facebook Inc. and Alphabet Inc. employ special super-voting shares, meaning a minority investor could still control the company, assuming their shares carry extra votes (Facebook Chief Executive Mark Zuckerberg’s super-voting shares being a case in point).

Whichever way you cut it, ByteDance will continue to have an important role in any way which is chosen for moving forward.

Never before has a tech deal undergone such a flippant and slippery curve. As of now, some of the analysts’ thoughts really surmises the befuddlement regarding the specifics of the deal. “It’s rare for the parties involved in a major deal to disagree so radically on its contours”.

There is certainly a need for all parties involved in the deal to get on the same page for all our sakes. Till the time we scratch our heads over the financials, stay tuned to this pace for more incoming updates.

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