TikTok and Oracle reach a deal with the U.S. government, here's what to expect

TikTok and Oracle have reached a deal with the U.S. government. Yahoo Finance's Akiko Fujita breaks down what to expect from the deal.

Video Transcript

ADAM SHAPIRO: Akiko Fujita has been keeping her eyes on what's going on with TikTok. It keeps-- the story keeps changing. We thought we had a deal. Then the president said he blessed it. Now he's removing his blessing. It feels like we're in the court of, you know, a king when he says those kinds of things. Where do we stand?

AKIKO FUJITA: Yeah, Adam, it feels like the headlines are changing by the hour. So certainly the deal is far from done. And to your point, we did get those comments from President Trump today, saying that look, for this deal to happen, it needs to be fully in control of an American company, and that's certainly not what's on the table right now.

We should point out, it now appears China could potentially block the deal as well. We've heard from the editor of the "Global Times," which is seen as very cozy to the Chinese government, saying Beijing will not approve the current agreement between ByteDance, TikTok's parent company, and Oracle and Walmart, "because the agreement would endanger China's national security, interests, and dignity."

So let's talk about the specifics that came out over the weekend based on what we have heard from all the companies involved. Right now we're looking at a deal where Oracle would get 12 and 1/2% stake in TikTok, Walmart would get a 7 and 1/2% stake, for a combined 20% stake, but ByteDance would retain an 80% stake in TikTok. Now, as part of the deal, TikTok would create a new entity known as TikTok Global, which would be headquartered in the US. That would oversee all of the technology involved in the US TikTok operations, including the data of those 100 million users here in the country, which would be stored on Oracle Cloud servers.

Now, the president as well as the companies argue that technically this new entity would be fully controlled or have a majority American control because of US investors like General Atlantic and Sequoia who already have a significant stake in ByteDance. So when you add up all of those numbers, we're taking a look at 53% of investors in TikTok Global being American investors. Chinese investors will have a roughly 36% stake in the company.

As part of the agreement, TikTok Global would agree to go public within the next year and create 25,000 new jobs, although there are no specifics on what kind of jobs or where those jobs will be created. The new entity would have a separate board. Four out of the five seats would go to Americans, but several reports suggest that ByteDance's founder Zhang Yiming would have one of those board seats. So that is not the clear cut that President Trump has been talking about. ByteDance reportedly seeking a valuation of $50 to $60 billion.

Now, Adam, we started by talking about President Trump's comments today to Fox News, talking about the full control of TikTok. We did get a statement from Oracle saying that "upon creation of TikTok Global, Oracle and Walmart will make their investments and the TikTok Global shares will be distributed to their owners. Americans will be the majority, and ByteDance will have no ownership in TikTok Global."

So we've got a number of headlines coming out, but still a lot of questions here about the security element which, as you'll recall, has really been at the center of these discussions. It was a reason why President Trump said that the government needed to go after TikTok. And on that front, we don't have a lot of clarity yet.

JULIE HYMAN: Another question for you, Akiko. There were some reports over the weekend that as part of this, $5 billion from the deal, somehow, would be going into US coffers for the president's newly announced initiative on education in US schools, what he calls a more patriotic education initiative. It's unclear if that's actually happening, but what do we know about that part right now?

AKIKO FUJITA: We don't know a lot about it. We've-- we've heard from the president, saying this would be an education fund that would be invested and that TikTok or ByteDance would essentially put up the money for that. That immediately called for a response from ByteDance, saying this is the first we've heard of that. We have always invested in education, but we have not necessarily agreed to this.

So you know, what you've got right now, Julie, is a deal that's on the table that is not at all what President Trump asked for. At the same time, you've got the president going on Fox News trying to sell the deal because, as you'll recall, in the lead-up to all of this, we had a number of Republican senators like Marco Rubio, like Josh Hawley come out and saying, wait a second. This is not what you called for, and this does not address the national security concerns. Now, we heard from Marco Rubio yesterday allude to some of those concerns, but we really haven't heard from a lot of these China hawks who were so vocal in the lead-up to all of this.

So President Trump certainly trying to do his best to sell the deal to say, look, we got what we wanted. But if you look at the facts right now on the table as it stands from both-- all of the companies involved, it is certainly a big concession on the US part. And you have to wonder if ByteDance is sitting there watching it thinking, well, we made out pretty well in all these negotiations, because now we've got a valuation of $50 to $60 billion, a potential IPO, and we still didn't have to give up full control of this platform.

ADAM SHAPIRO: Akiko, we appreciate the update on TikTok.