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TikTok deal doesn’t match demands that Trump has been making for months

Ben Werschkul
·DC Producer
·6 mins read

For months, President Trump and his allies laid out quite clear provisions for what they said was needed to be in any Tiktok deal.

“We want no security problems with China, it’s got to be an American company,” Trump said on Aug. 3, adding that “it’s got to be owned here.”

Over the weekend, Trump announced he had approved the deal and claimed that the new company “will have nothing to do with China.”

But as more details emerge, that just doesn’t appear to be the case.

“TikTok will run on the Oracle Cloud and Oracle will become a minority investor in TikTok Global,” is how Oracle (ORCL) CEO Safra Catz described her company’s role in a statement.

Oracle will take a 12.5% stake in the new company, TikTok Global, and Walmart (WMT) is taking another 7.5%, for a combined 20% stake.

That leaves 80% – for now – in the hands of existing shareholders of the Chinese company ByteDance, many of whom are not just Chinese but work for ByteDance itself.

BEIJING, CHINA - AUGUST 22: A symbol of TikTok (Douyin) is pictured at The Place shopping mall at dusk on August 22, 2020 in Beijing, China. (Photo by VCG/VCG via Getty Images)
A symbol of TikTok (Douyin) is pictured at The Place shopping mall at dusk on August 22, 2020 in Beijing, China. (Photo by VCG/VCG via Getty Images)

‘This is unprecedented in a lot of different directions’

In a statement to Yahoo Finance, Oracle Executive Vice President Ken Glueck said that once the details are completed, “TikTok Global shares will be distributed to their owners, Americans will be the majority and ByteDance will have no ownership in TikTok Global.”

In any case, “this is unprecedented in a lot of different directions,” said Roger Zakheim, Washington director of the Ronald Reagan Presidential Foundation, in a recent Yahoo Finance appearance.

He cited Trump’s close involvement in the negotiations as well as the fact that the U.S. appears close to approving significant foreign ownership in the company.

On Monday morning Trump said he “heard” that after TikTok Global goes public next year, Walmart and Oracle would be "buying out the rest of it and they're buying out a lot."

The headquarters of ByteDance, the parent company of video sharing app TikTok, is seen in Beijing on September 16, 2020. - Silicon Valley tech giant Oracle is "very close" to sealing a deal to become the US partner to Chinese-owned video app TikTok to avert a ban in the United States, President Donald Trump said on September 15. (Photo by GREG BAKER / AFP) (Photo by GREG BAKER/AFP via Getty Images)
The headquarters of ByteDance, the parent company of TikTok, in Beijing. (GREG BAKER/AFP via Getty Images)

The companies have not said anything like that publicly. Walmart said Americans will take more control eventually. The parties have agreed to “work toward an initial public offering of the company in the United States within the next year to bring even more ownership to American citizens,” Walmart said.

Other observers have also noted that the deal does not appear to stand up to initial hopes. Axios called the deal a kind of Potemkin village agreement: it is “full of provisions aimed at creating the temporary appearance of a presidential win.”

‘China continues to control the code’

On Sunday, a key critic of TikTok still had questions. “If China continues to control the code, as I understand they would in this deal, they could put in that code an instruction to secretly send data back to China,” Sen. Marco Rubio (R-FL) noted in a Fox interview, adding that it doesn’t matter “where the actual data is housed.”

In spite of Trump’s touting of a “lot of very, very powerful security,” Rubio said, “if there's any opportunity whatsoever for China to continue to collect personal data on Americans, then we can't be supportive of that deal.”

By Monday, the president was hedging a bit, telling Fox News that “if we find that [Oracle and Walmart] don't have total control then we're not going to approve the deal."

Other Republican senators have previously gone even further. Sen. Ted Cruz (R-TX) has said any sort of partnership between Oracle and ByteDance “raises serious national security concerns.” Sen. Marsha Blackburn (R-TN) has also said that it was problematic for ByteDance to have any sort of “visibility” into U.S. data.

CULVER CITY, Aug. 23, 2020  -- Photo taken on Aug. 21, 2020 shows a logo of the video-sharing social networking company TikTok's Los Angeles Office in Culver City, Los Angeles County, the United States. TikTok confirmed Saturday that it will file a lawsuit against the Trump administration over an executive order banning any U.S. transactions with its parent company ByteDance. (Xinhua via Getty) (Xinhua/Xinhua via Getty Images)
TikTok currently has offices in Los Angeles. The new company, Tiktok Global, is set to be based in Texas. (Xinhua/Xinhua via Getty Images)

Tiktok Global – even after a potential IPO in 2021– appears set to include Chinese influence for years. Oracle said that it “will be an independent American company, headquartered in the U.S., with four Americans out of the five member Board of Directors.”

One board seat is currently reserved for ByteDance and its founder, Zhang Yiming. That looks like it will continue into 2021 and possibly beyond.

‘It’s probably easier to buy the whole thing’

In August, Trump said it’s "probably easier to buy the whole thing than to buy 30% of it because they say, ‘How do you do 30%? Who’s going to get the name?’” he said. “How do you do that if it’s owned by two different companies?”

That, in fact, is close to what happening. “It’ll continue to be named TikTok, as it was all along,” Trump told reporters on Saturday. “And that’s it.”

Zackheim said that “even giving a Chinese company a minority interest is something” the U.S. government has not allowed in the past. A technically American investment might make the U.S. the majority stakeholder in TikTok Global, but Washington appears set to allow more foreign equity “than you’ve seen in these cases before.”

A $5 billion cut

Another constant in Trump’s remarks in recent months has been that the U.S. Treasury should get a cut of any deal. The president backed away from that demand last week saying, “Amazingly, I find that you’re not allowed to do that.”

It was replaced with an apparent provision for the new company to make a $5 billion contribution toward Trump’s new push for “patriotic” education.

“That’s their contribution that I’ve been asking for,” the president said on Saturday. ByteDance quickly said on Sunday that it was the first they had heard of any education fund.

SAN FRANCISCO, CALIFORNIA - SEPTEMBER 16: Oracle chairman of the board and chief technology officer Larry Ellison delivers a keynote address during the 2019 Oracle OpenWorld on September 16, 2019 in San Francisco, California. Oracle chairman of the board and chief technology officer Larry Ellison kicked off the 2019 Oracle OpenWorld with a keynote address. The annual convention runs through September 19.  (Photo by Justin Sullivan/Getty Images)
Larry Ellison delivers the keynote address during the 2019 Oracle OpenWorld conference in 2019. (Justin Sullivan/Getty Images)

On Monday, developments in China suggested that the deal may be in jeopardy from Beijing officials, but Oracle is counting on its close relationship with the president to secure approval in Washington, D.C.

Oracle CEO Larry Ellison is one of the president’s richest and most prominent backers and many have noted that the federal government is currently Oracle’s largest customer with all four branches of the military using Oracle products.

“I think Oracle is a great company and I think its owner is a tremendous guy,” Trump has repeatedly said. “I think that Oracle would certainly be somebody that could handle it.”

Ben Werschkul is a producer for Yahoo Finance in Washington, DC. Akiko Fujita contributed reporting.

Read more:

Who is lining up against the TikTok deal in Washington – and why

Why Biden may not differ from Trump when it comes to TikTok

TikTok deal will help Oracle 'catch up': analyst

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