ByteDance, the Chinese parent company of TikTok, would prefer to shut down the popular video app in the U.S. if forced to divest it, rather than selling it to an American buyer. According to sources familiar with the matter, the company is unwilling to part with its core algorithms, which are integral to its operations. This decision comes in response to a new U.S. bill that mandates the sale of TikTok unless ByteDance can address national security concerns.
President Joe Biden recently signed a foreign aid package that includes a provision potentially banning TikTok. The legislation sets a deadline for ByteDance to either sell TikTok to a U.S. entity or face a ban from app stores, with a possible three-month extension if the company shows progress in negotiations. Despite TikTok’s significant user base in the U.S., it represents only a small fraction of ByteDance’s global operations, primarily based in China.
The challenges of divesting TikTok are compounded by China’s regulatory environment, which treats the app’s algorithms as controlled items under its Export Control Law. This makes a sale without these algorithms unlikely and unattractive to potential buyers. Former U.S. Treasury Secretary Steven Mnuchin has shown interest in acquiring TikTok’s U.S. operations, but without its key algorithms, the value and functionality of the app would be significantly diminished.
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