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Walmart Shares Surge to Record High After Joining Microsoft Chase for TikTok

Walmart said it was confident that teaming with Microsoft to buy the world's most popular video-sharing app "would meet both the expectations of U.S. TikTok users while satisfying the concerns of U.S. government regulators."

Walmart Inc.  (WMT) - Get Walmart Inc. Report shares surged to a fresh record high Friday after the world's largest retailer said it was ready to join Microsoft Corp  (MSFT) - Get Microsoft Corporation (MSFT) Report in its pursuit of the U.S. operations China-based video sharing app TikTok.

Walmart, which has been working with Microsoft to broaden its e-commerce, advertising and marketplace growth through cloud computing and artificial intelligence, unveiled its interest in TikTok late Thursday following multiple media reports that suggested it was ready to join talks with TikTok's parent, ByteDance. 

ByteDance was ordered to sell the U.S. operations of TikTok, which could be valued anywhere between $30 billion and $50 billion, by President Donald Trump earlier this month amid concerns that the China-based group, and its data collection methods, posed a risk to national security. 

"We are confident that a Walmart and Microsoft partnership would meet both the expectations of U.S. TikTok users while satisfying the concerns of U.S. government regulators,” Walmart said in a statement.

Walmart shares were marked 1.85% higher in pre-market trading Friday, indicating an opening bell price of $139.13 each, after opening at $141.05, an all-time high that would value the Bentonville, Arkansas-based retailing giant at just under $400 billion.

Microsoft shares were seen 0.6% higher at $227.50 each.

President Trump issued a pair of Executive Orders in early August that barred "U.S. transactions" with China-based social media apps WeChat and TikTok, citing "significant risks" to personal data and digital security.

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Trump has said the app , which has been downloaded over 175 million times in the United States alone and has 1 billion global users, will be banned in the U.S. if it's not sold by an extended deadline of November 12.

The decision, which is being challenged in court by WeChat owners Tencent Holdings and ByteDance, will come into effect  around the same time Microsoft is expected to either complete its purchase of TikTok or walk away from a transaction that was essentially forced by the White House.

TikTok's fate was also a factor in the surprise resignation of U.S. CEO Kevin Mayer, a former Disney  (DIS) - Get Walt Disney Company Report executive, who left the group earlier this week after only three months at the helm.

"On the surface, certainly Walmart and TikTok make for strange bedfellows. But, we can see the strategic rational for Walmart as simply a way to bring more consumers into their e-commerce ecosystem," said DA Davidson analyst Michael Baker. "Owning TikTok would presumably increase Walmart's reach with consumers in general but more specifically for younger consumers."

"To the extent that TikTok would add more eyeballs for Walmart’s e-commerce platforms, that would make Walmart more attractive for third party sellers for both the Marketplace and as an advertising platform," he noted.

Walmart's e-commerce platform was a key driver to the group's blowout second quarter earnings, as sales rose 97% from last year as the group introduced curbside pickup for online orders during the peak of the coronavirus pandemic. 

Walmart said adjusted earnings for the three months ending in July were pegged at $1.56 per share, up 22.8% from the same period last year as group revenues rose 5.6% to record $137.7 billion.