TikTok's Profit Puzzle: Who Really Benefits?

ByteDance, the Chinese parent company, stands to gain a significant portion of the profits from TikTok's US operations, despite not owning a majority stake.

Deal Details

• Valuation: TikTok's US operations valued at $14 billion.
• Investors:
• New investors (Oracle, Silver Lake, Abu Dhabi's MGX): 45% stake.
• Existing and new American investors: 35% stake.
• ByteDance: Limited to 19.9% due to US laws.
• Profit Sharing: ByteDance could gain up to 50% or more of the profits through licensing the app's algorithm and other agreements.

Ongoing Concerns

• National Security: Experts question if the deal truly addresses national security concerns.
• Algorithm Control: The algorithm, crucial to TikTok's success, remains under ByteDance's control.
• Chinese Government: Has not explicitly approved the deal but expressed pleasure in seeing companies reach solutions.

Political Landscape

• US Congress: Mandated ByteDance to divest its US operations.
• Lawmakers: Calling for more oversight to ensure no cooperation on the algorithm or operational ties between ByteDance and the new TikTok entity.

Conclusion

This deal might be more about short-term optics than long-term security. It creates a majority American-owned entity while allowing ByteDance to continue benefiting from TikTok's success in the US.