US IPO, Chinese ownership, $5B in taxes – TechCrunch

There is no shortage of speculation and reports around TikTok’s future in the U.S. Amid a swirl of rumors, TikTok’s Chinese parent ByteDance issued a statement (in Chinese) on Monday morning, bringing clarity to its ongoing deal that has captured global attention over the past few weeks.

ByteDance is still the owner

China’s ByteDance confirms it will retain an 80% stake in TikTok after selling a total of 20% to Oracle, its “trusted technology partner,” and Walmart, its “commercial partner.”

But the arrangement doesn’t address the core of many observers’ worries, as my colleague Jonathan Shieber argued: “The deal benefits everyone except U.S. consumers and people who have actual security concerns about TikTok’s algorithms and the ways they can be used to influence opinion in the U.S.”

Sitting on TikTok’s board are ByteDance’s current members, all non-Chinese except ByteDance founder Zhang Yiming. Walmart CEO Doug McMillon is the latest addition to the board.

TikTok seeks US IPO

TikTok confirms it’s seeking an initial public offering in the U.S. in an effort to “further enhance corporate governance and transparency.”

Clearly, the video app hopes an IPO, which will expose it to more public scrutiny, could allay fears over the alleged national security threat attached to its Chinese origin.

Notably, ByteDance refers to the video app as “TikTok Global” in the statement, suggesting the app won’t be split into a U.S. unit and the rest of the world. TikTok claims nearly 700 million monthly users around the globe, as revealed in a court document. 100 million of the users are based in the U.S., where its current headquarters is.

No algorithm transfer

In line with previous reports, ByteDance won’t be handing over TikTok’s algorithms or technologies to Oracle. Instead, the American database giant will gain the authority to perform security checks on “TikTok’s U.S. source codes.”

“Revealing source codes is a universal solution to data security challenges posed to multinational corporations,” ByteDance said, attempting to equate its decision to Microsoft’s Transparency Center in China as well as a similar facility Cisco set up in Bonn, Germany.

It’s still unclear how Oracle’s role as a code inspector and user data host will resolve concerns around Beijing’s possible tinkering of TikTok’s content black box.

$5 billion tax dollars

ByteDance estimates that TikTok will pay a total of $5 billion in income tax and other tax dollars incurred in business to the U.S. Treasury in the coming years. Nonetheless, the final figure is contingent on TikTok’s “actual business performance and the U.S. tax structure,” the parent said, stressing that the tax money has “nothing to do with the ongoing deal.”

Educational commitment

In response to reports claiming TikTok will be setting up a $5 billion education fund in the U.S., ByteDance said it was not aware of such a plan but has consistently devoted effort to education, including working with its “partners and shareholders” to design online classes powered by artificial intelligence and videos.

In China, ByteDance’s incursion into education has been widely reported. Asides from proprietary products like the English-learning platform Gogokid, the company also invested in a range of outside players including Minerva, the venture-backed institution challenging traditional higher education.