TikTok CEO Shou Zi Chew informed employees on Thursday that the company will base its U.S. operations under a new joint venture.
As per a memo sent by Chew and obtained by CNBC, the entity is named TikTok USDS Joint Venture LLC. In the joint venture, Chew stated that the company had signed agreements with the three managing investors, including Oracle, Silver Lake, and MGX, based in Abu Dhabi. He indicated that the closing date of the deal is Jan. 22.
China-based ByteDance had to sell its U.S. operations under TikTok or risk being effectively banned in the country under a law on national security, which the Supreme Court affirmed in January.
President Donald Trump signed an executive order in September, accepting a proposed deal that would see TikTok remain operational in the U.S. by fulfilling the terms of a law signed by former President Joe Biden.
Chew reported that the new TikTok joint venture would be “majority owned by American investors, governed by a new seven-member majority-American board of directors, and subject to terms that protect Americans’ data and U.S. national security.”
However, the U.S. joint venture will be held 50 percent by a consortium of new investors, such as Oracle, Silver Lake, and MGX, with 15 percent each. The memo noted that the affiliates of some current investors of ByteDance will possess just above 30 percent, and the memo will retain nearly 20 percent.
The TikTok chief stated that the service will ensure that the U.S. data is safe, the content it contains is secure, and so is its prized algorithm, content moderation, and “software assurance.”
The memo stated that, as an investor, Oracle will also act as the “trusted security partner” in auditing and ensuring that it adheres to “agreed-upon National Security Terms.” Therefore, Chew wrote that sensitive U.S. data will be stored in cloud computing data centers operated by Oracle in the United States.
Meanwhile, Oracle shares had surged 5 percent in after-hours trading on Thursday. The memo reported that the new TikTok will also have the responsibility of retraining the core content recommendation algorithm “on U.S. user data to ensure the content feed is free from outside manipulation.”
Chew has mentioned that TikTok global U.S. entities “will manage global product interoperability and certain commercial activities, including e-commerce, advertising, and marketing.”
The attorney general, under the executive order of Trump in September, was barred from implementing the national security law within 120 days to “permit the contemplated divestiture to be completed,” to enable the deal to be closed by Jan 23.
President Trump stated in September that the Chinese President Xi Jinping agreed to proceed with the proposal. Vice President JD Vance observed that there was “some resistance” from the Chinese government to back the agreement that he said valued TikTok’s U.S. business at $14 billion.
In a statement, ByteDance said in September that it would “work in accordance with applicable laws to ensure TikTok remains available to American users through TikTok U.S.”
ByteDance said at the time, “We thank President Xi Jinping and President Donald J. Trump for their efforts to preserve TikTok in the United States.”
