Sources: the Biden administration and CFIUS are demanding that TikTok's Chinese owners sell their stakes in the company or face a possible US ban of the app

TikTok says forced sale won't resolve national security issues; its CEO set to appear before Congress next week

Wall Street Journal 2023-03-16 John D. McKinnon

Context & Ripple Effects

The demand marks a break from the preliminary national-security arrangement reached without a ByteDance sale. TikTok leadership had already identified divestiture as its last-resort option if that approach failed.

The dispute also follows negotiations centered on the Chinese government's potential role in, and influence over, any future agreement. TikTok's position that a sale would not settle the security concerns now directly challenges CFIUS's remedy.

First-order effects

TikTok and its Chinese owners must weigh a stake sale against the prospect of a US ban, while the existing negotiated proposal loses its status as the apparent path to resolution.
Congressional scrutiny intensifies as TikTok's CEO prepares to testify with CFIUS pursuing a remedy the company says is inadequate.

Second-order effects

Any buyer or deal structure must address the Chinese government's role that had already complicated negotiations, rather than simply transfer ownership.
China's stated opposition to a forced sale raises the prospect that a transaction acceptable to CFIUS may face resistance from the Chinese side, narrowing the room for a negotiated outcome.

Third-order effects

If CFIUS maintains that foreign ownership itself is incompatible with the security remedy, cross-border consumer platforms may face ownership separation rather than mitigation agreements as the governing US approach.
The case puts US market access for Chinese-owned platforms on a path where corporate control and national-security review are increasingly inseparable.

The trend: US national-security review is moving from negotiated safeguards toward ownership-based remedies for Chinese-owned consumer platforms.

Discussion

@pkafka Peter Kafka on x
Yup: Joe Biden is using Donald Trump's TikTok strategy. https://twitter.com/...
@alexisohanian @alexisohanian on x
It's happening, folks https://twitter.com/...
@danprimack Dan Primack on x
Reminder that one problem the trump White House had when trying to ban TikTok was that its executive orders were written very poorly, giving lots of lines of legal defense.
@bobbyallyn Bobby Allyn on x
NEW: A TikTok spokeswoman has confirmed the Journal's reporting that CFIUS is demanding TikTok be sold to an American company or risk being ban. “We are disappointed with this outcome,” a TikTok spokeswoman said, noting that the company will stay focused on implementing Project..…
@jamiemetzl Jamie Metzl on x
Unfortunately, there is no such thing as a Chinese company not ultimately answerable to the Chinese Communist Party. This basic reality forces governments around the world to treat Chinese companies as de facto agents of the Chinese state. https://www.nytimes.com/...
@carnage4life Dare Obasanjo on x
Kind of a self own for TikTok's CEO to say even selling the company won't fix the national security issues, right? https://twitter.com/...
@jessicalessin Jessica Lessin on x
Very initial reaction: Investors are likely buyers with an aim to IPO asap. Sequoia wants its money out, asap. https://www.theinformation.com/ ...
@drjessmaddox Dr. Jess Maddox on x
“Aging politicians might not get it. But TikTok has become a valued place for learning and communication, as well as online innovation. Banning it would be exactly the kind of...censoring of the internet that we have come to expect of China, not the US.” https://www.washingtonpos…
@politicalmiller Jack Miller on x
Good. We'd have never let the USSR own CBS. https://twitter.com/...
@onlyyoontv Eunice Yoon on x
TikTok said Wednesday that a forced sale wouldn't address the perceived security risk. It has pledged to spend $1.5 billion on a program to safeguard U.S. user data and content from #China government access or influence. @tiktok_us https://www.wsj.com/...
@divestech Dan Ives on x
Cold tech war between US and China gaining steam with this move by the Beltway as TikTok future remains a big debate within the US. If banned would clearly be bullish for Meta
@eriqgardner Eriq Gardner on x
Tick tick tick... https://twitter.com/...
@rihardjarc Rihard Jarc on x
$META breaking $200 in aftermarket on the TikTok sale or ban news. Reels is the biggest beneficiary in the event of an TikTok ban as most people would switch to Reels. https://twitter.com/...
@peterzeihan Peter Zeihan on x
Basically a Trump era policy, but with a longer attention span. https://www.wsj.com/...
@adamkovac Adam Kovacevich on x
CFIUS doesn't announce its decisions (in order to help companies/countries save face), so “people familiar with” reports like this are effectively confirmation. My prediction is TikTok CEO now pulls out of Congressional testimony next Thurs. https://www.wsj.com/...
@julianku Julian Ku on x
Biden is back to the original Trump position on this. “But the demand for a sale — coupled with the White House's support for legislation that would allow it to ban TikTok in the United States — hardens the administration's approach.” https://www.nytimes.com/...
@jeffjarvis Jeff Jarvis on x
“But a ban would be an entirely un-American, undemocratic and inappropriate response to an unproven risk that the Chinese-owned platform will share users' data with Beijing for nefarious purposes.” Banning TikTok is a bad solution to the wrong problem https://www.washingtonpost.c…
@mattnavarra Matt Navarra on x
Banning TikTok is a bad solution to the wrong problem @stokel is spot on here https://www.washingtonpost.com/ ...
@stuwoo Stu Woo on x
I met TikTok's CEO in Washington to discuss his plan to save his app as it faces a possible U.S. ban. His message to politicians: Forcing a sale of TikTok won't protect Americans from potential Chinese spying or interference, but his proposal will. https://www.wsj.com/...
@deitaone @deitaone on x
ByteDance Executives Informed Beijing Of U.S. Request to Divest TikTok — Sources Some Senior ByteDance Executives Upset By U.S. Demand After Investing Billions of Dollars in U.S. Infrastructure — Sources
@deitaone @deitaone on x
TikTok CEO Says a Sale of the App Won't Solve U.S. Security Concerns — WSJ Interview TikTok CEO Rules Out Near-Term IPO for the Popular Video App TikTok CEO Says App Is Unprofitable as It Spends on Data Security

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