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Microsoft talks to buy TikTok's U.S. operations spark ire in China

Updated: Sep 1


A potential shotgun wedding to Microsoft Corp (MSFT.O) for TikTok’s U.S. operations provoked an outcry on Monday on Chinese social media

BEIJING/HONG KONG (Reuters) - A potential shotgun wedding to Microsoft Corp (MSFT.O) for TikTok’s U.S. operations provoked an outcry on Monday on Chinese social media as well as criticism from a prominent Chinese investor in TikTok owner ByteDance.


The U.S. tech giant formally declared its interest on Sunday after President Donald Trump, who has cited national security risks posed by the Chinese-owned short video app, reversed course on a planned ban and gave the two firms 45 days to come to a deal.

The proposed acquisition of parts of TikTok, which boasts 100 million U.S. users, would offer Microsoft a rare opportunity to become a major competitor to social media giants such as Facebook Inc (FB.O) and Snap Inc (SNAP.N).


Shares in Microsoft, which owns the business social media network LinkedIn and is also seeking to buy TikTok’s Canadian, Australian and New Zealand interests, rose nearly 3% in early trades on Monday.


ByteDance has not publicly confirmed the sale talks. But in an internal letter to staff on Monday seen by Reuters, the company’s founder and CEO Zhang Yiming said the firm had started talks with a tech company it did not identify to clear the way “for us to continue offering the TikTok app in the U.S.”


Clinching a deal that will satisfy all parties and potentially act as a lightning rod for U.S.-China relations will be a tall order.


People close to the situation have told Reuters that all of TikTok could be worth $50 billion, but the forced sale of the U.S. division and some other units alone will likely yield much less than that.


Hu said Microsoft was a credible buyer but questioned how selling large parts of TikTok’s operations at such an early stage of its growth could ever be a good deal for ByteDance.

“It absolutely makes no sense. Bytedance is an innocent victim of the mad politics and mad geopolitics. It is a sad outcome for Bytedance, for entrepreneurial capitalism, and for the future of global commerce,” he said.

Tech bankers in Asia said investment banks working on the deal would have to be careful not to antagonize Trump.


Zhang’s letter to staff also said ByteDance did not agree with the stance taken by the Committee on Foreign Investment in the United States (CFIUS), which scrutinizes deals for national security risks, that it must fully divest TikTok’s U.S. operations.


The Chinese government declined to comment specifically on the Washington’s move to force a sale of TikTok’s U.S. operations. People walk past the Bytedance headquarters building in Beijing, China August 3, 2020. REUTERS/Carlos Garcia Rawlins


Some commentators criticized ByteDance, saying it has not shown as much backbone as Huawei Technologies, also in the crosshairs of U.S.-China tensions and now on a U.S. trade blacklist.


While TikTok is ByteDance’s most well known app globally, the company makes the bulk of its revenue from advertising on Chinese apps including Douyin - a Chinese version of TikTok - and news aggregator app Jinri Toutiao.

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