06:35
US demands for TikTok may escalate decoupling and hurt businesses, says China expert
Source:
https://scmp.com/news/china/money-wealth/article/3098674/bytedance-investors-look-use-stakes-tiktok-fund-bid-popular China
TikTok sues Donald Trump and US government over threatened ban
- US president’s executive order gave China’s ByteDance 90 days to divest popular video-sharing app’s US operations
- Meanwhile, some ByteDance investors are looking to use stakes to finance bid for TikTok
TikTok sued the US government on Monday over an executive order that would ban the popular short-form video-sharing app in the United States.
The lawsuit, which was filed in federal district court for the Central District of California, was the app’s strongest opposition to the White House yet in an escalating battle by US President Donald Trump for singling out the Chinese owned video app as a national security threat.
TikTok and its Chinese parent ByteDance sued the president, the US Department of Commerce and Commerce Secretary Wilbur Ross.
The Trump administration as well as lawmakers have repeatedly accused TikTok as a threat to US national security as any Chinese-owned company could be obliged to hand over crucial US information to Beijing.
Trump in his August 6 executive order requested that the app be sold within 45 days or face a ban on any transaction in the US. Trump issued a separate executive order on August 14 giving ByteDance 90 days, or until November 12, to divest TikTok’s US operations to an American owner.
TikTok said in a post on its website on Monday that the company strongly disagreed with the White House’s position that the company was a national security threat, saying it had “taken extraordinary measures to protect the privacy and security of TikTok’s US user data”.
It said the administration ignored TikTok’s “extensive efforts” to address the concerns, and accused the administration of politicising the dispute.
“We do not take suing the government lightly,” TikTok said in the post. “However we feel we have no choice but to take action to protect our rights.”
The Trump administration violated the constitutional right to due process for banning the company without notice or an opportunity to be heard, it added.
The White House did not immediately respond to a request seeking comment.
As the US and China battle over trade, Hong Kong’s autonomy, cybersecurity and the spread of the coronavirus, TikTok has emerged as a flashpoint in the dispute between the world’s two largest economies.
The app, which let users take and share 15-second videos, has grown exponentially in the US – particularly among American teenagers and young adults. About 60 per cent of its 26.5 million monthly active users in the United States are between the ages of 16 and 24, the company said last year.
Its popularity partly contributed to the attention it has received from the Trump administration.
The White House has stepped up its efforts to purge what it deems “untrusted” Chinese apps from US digital networks. Beyond TikTok, Trump has also issued an order that would prohibit transactions with Tencent’s messenger app WeChat.
A group of WeChat users that said it was not affiliated with the app’s owner filed a lawsuit on Friday claiming Trump’s executive order “unlawful and unconstitutional”. The suit was filed in federal district court for the Northern District of California by US WeChat Users Alliance, a non-profit organisation, together with a small business and other individuals.
Talks for ByteDance to sell TikTok’s US operations have heated up since June, when it became clear to TikTok that it should sever ties to its Chinese owner in order to continue operating in the US. Congress in early August approved a bill that would prohibit federal employees from using the app on government-issued gadgets.
On Monday, TikTok also accused Trump of misusing the International Emergency Economic Powers Act, which lets the president regulate international commerce during a national emergency.
Trump had in May 2019 invoked that law to stop alleged efforts by foreign telecommunications companies to conduct economic and industrial espionage against the US.
03:07
Stop offering ‘untrusted’ Chinese apps like TikTok and WeChat, Washington urges US tech companies
But TikTok said the executive order was not supported by the emergency Trump declared a year earlier, and that the company did not provide the types of technology and services contemplated at that time.
ByteDance has been in talks with potential buyers including Microsoft and Oracle for TikTok’s North American, Australian and New Zealand operations, which could be worth US$25 billion to US$30 billion.
ByteDance investors including investment firm General Atlantic are discussing ways to use their existing stakes to help finance a bid, according to a person familiar with the matter. Under that structure, investors can exchange some or all of their existing stake for new equity in TikTok assets, the person said, who asked not to be named because of the discussions are private.
Trump had said an American company is required to own the majority of TikTok’s US operations, which can become the obstacle for these investors to take part in the new ownership.
A US government inter-agency panel, the Committee on Foreign Investment in the United States (CFIUS), has to sign off on the deal.
But the push by some ByteDance investors for a bigger role in the deal may provide the Chinese company with more options and avoid a fire sale.
A spokesperson at TikTok did not comment on the deal structure.