President Donald Trump has allowed Microsoft 45 days only to finalize the TikTok deal. It is an initiative by Microsoft to acquire the TikTok, which is a short-video app. Even the sources close to the President have confirmed that there are only a few days within which a final decision has to be taken. The initiative is nothing short of an about-face for Trump. Besides, it is now extremely evident that the U.S. tech giant is highly interested in this superb social media business. However, the acquisition can add fuel to the already tense relationship between the USA and China. On Friday, July 31, President Trump publicly announced his plans for banning TikTok.
The primary matter of concern that is bothering the USA government is the Chinese ownership of the app. According to Donald Trump, there is a possibility of a risk for the country’s national security. Moreover, the government wants to ban TikTok because it feels that personal data was being transported from the USA to China through app operations. The proposition of acquitting TikTok is to offer Microsoft a golden opportunity. The app that boasts of more than 100 million American users believes that Microsoft can become a significant competitor to social media biggies such as Snap Inc. and Facebook Inc. after the deal. Besides, LinkedIn is already a leading professional social media platform that is owned and managed by Microsoft.
Banning TikTok will be a foolish idea now
Initially, President Trump had dismissed the idea of Microsoft purchasing TikTok. However, things are now different after an elaborate meeting that was held on Sunday, August 2. Present in the meeting were President Trump, and Satya Nadella, CEO of Microsoft. After the session ended, a Washington-based company named Redmond revealed that the negotiations for acquiring TikTok from ByteDance would continue. Plus, Microsoft aims to achieve the goal by maximum September 15. The deadline was put in front of ByteDance and Microsoft by the CFIUS or Committee on Foreign Investment in the United States. The body scrutinizes all business dealings for potential risks of national security.
It seems that the change is a decision on the part of President Trump as a result of pressure by members of the Republican Party, who are also his advisers. According to a close source, President Trump now realizes that altogether banning TikTok will lead to alienation of the country’s youth. Now the government cannot afford to do so at any cost before the upcoming Presidential elections. Besides, such a decision may also trigger an array of legal challenges that may even turn complicated. Therefore, several lawmakers of the Republican party unanimously advised Trump on this. Finally, the President has agreed to move forward with the decision to sell TikTok to Microsoft.
Supervisions of negotiations between Microsoft and ByteDance
As mentioned earlier, the Committee on Foreign Investment in the United States will supervise all the talks between Microsoft and ByteDance. Moreover, CFIUS has the right to block any dealing or agreement, if it feels the need for the same. Also, Microsoft has issued a statement saying that no one should keep an expectation about the surety of a real deal by the end of the given negotiation period. In the official announcement, the Microsoft spokesperson said that they appreciate the need to address President Trump’s concerns. Besides, the acquisition of TikTok will be based on a thorough security review and a revelation of economic benefits. It is the government and treasury’s right to know every detail of a business deal such as this.
TikTok is continually emerging as a flashpoint amidst soaring relations between China and the United States. The primary reasons for the deterioration in the relationship included trade and security. Besides, Hong Kong’s autonomy, the spread of the novel coronavirus, and cybersecurity are some of the other reasons that have given rise to the dispute between two of the world’s largest economies. As per Microsoft’s proposition, it demands a complete operational takeover of TikTok in countries, including the USA, New Zealand, Australia, and Canada. It is also ensuring the USA government that every detail of American users’ data will remain in the country only. Moreover, Microsoft is planning to invite several American investors to take up the minority stakes and shares of TikTok. Almost 70% of the external capital invested by ByteDance comes from American investors.
Probable challenges in the process of acquisition
Amidst everything else, there is still no clarity about the amount against which ByteDance may sell TikTok to Microsoft. While there are rumors that the valuation exceeds $50 billion, the real news is yet to come out. However, people are already assuming that the list price can go down due to the USA government’s pressure of divesting. A significant problem in the acquisition process will be the separation of TikTok’s technology from the access and infrastructure of ByteDance. Therefore, alleviation of the concerns regarding the integrity of confidential user information will never be natural. Moreover, ByteDance owns another Chinese short-video app called Douyin. The code of TikTok and Douyin is the same too, and that becomes another challenge.
An idea that can ease out many problems here is to give a transition period to both ByteDance and Microsoft. The companies can both work together to develop better technology that will help the process of separation of the app from ByteDance. Further, Microsoft does not want to speak more about the procedure until they can reach a fruitful deal. On the other hand, the USA has enhanced all the scrutinizing systems concerning app developers. It is only to ensure that all the personal data is remaining safe, especially if there is any information about the USA intelligence or military. The divestment order of TikTok is not the first-ever decision of this type on part of the USA government. The White House remains a witness to many such events that have taken place in history.