TikTok Deal Talks Stall Over Algorithm Dispute: Report

TikTok's algorithms were considered a vital part of the deal negotiations up until Friday, when the Chinese government issued new restrictions on the export of AI technology.
Publish date:

Deal talks between U.S. companies and TikTok hit a snag late last week, when uncertainty arose over whether TikTok's algorithms would be included in any package. 

According to the Wall Street Journal, restrictions issued by the Chinese government last Friday, which place new rules on the export of artificial intelligence technology, threw into question whether TikTok's algorithms could be included in a sale to a U.S. buyer.

Participants in the talks are trying to figure out what, if any, approvals they would need from the Chinese government for a sale to go through. And that has diminished the chance that a deal will be completed soon, according to the people familiar with the discussions, because the algorithms are considered a vital part of the app's value. 

TikTok's owner, Bytedance, is asking for $30 billion for the app's U.S. operations, according to the WSJ. 

There are two main parties vying for TikTok: Microsoft  (MSFT) - Get Report and Walmart  (WMT) - Get Report, which are jointly pursuing the deal; and Oracle  (ORCL) - Get Report, which has formed an alliance with some of TikTok's private equity investors. 

The potential deal is also fraught with political drama, with President Trump recently signing an executive order banning transactions between TikTok and any U.S. firm, citing security reasons, unless an American firm buys it. Last week, TikTok sued the Trump administration over the executive order. 

Trump has also suggested that the U.S. should receive a “very big proportion” of any proceeds from the deal. 

In its lawsuit, TikTok accused the White House of failing to engage with good faith the company's efforts to show its commitment to the U.S. market, as well as various security and privacy measures it has implemented. TikTok has roughly 100 million U.S. users.

Under the president's executive order, signed on August 6, “any transaction” between a U.S. citizen and TikTok's Beijing-based parent company would be outlawed within 45 days. The order was then extended to 90 days, setting a deadline of November 12th.

TikTok officials described the order as a pressure campaign with the goal of forcing an American company to move quickly to acquire the app's U.S. assets.