ByteDance has abandoned the sale of TikTok in the United States to pursue a partnership with Oracle that it hopes will spare it a U.S. ban while appeasing China, people familiar with the matter told Reuters.
The Beijing-based firm had been in talks to divest the business to Oracle or a consortium led by Microsoft after President Donald Trump ordered the sale last month and threatened to shut down the short-video app in the country.
While TikTok is best known for dancing videos that go viral among teenagers, U.S. officials are concerned user information could be passed to China’s communist government. TikTok, which has as many as 100 million U.S. users, has said it would never share such data with Chinese authorities.
Sale negotiations were upended when China updated its export control rules last month, giving it a say over the transfer of TikTok’s algorithm to a foreign buyer. Reuters reported last week that China would rather see TikTok shut down in the United States than allow a forced sale.
On Monday, China’s state-run English television channel CGTN cited sources as saying ByteDance will not sell TikTok’s U.S. operations to Oracle or Microsoft, and will not give the source code for the platform to any U.S. firm.
Under Bytedance’s latest proposal, Oracle will be the firm’s technology partner and assume management of TikTok’s U.S. user data, sources told Reuters on Sunday. Oracle is also negotiating taking a stake in TikTok’s U.S. operations, they said.
The data is currently stored in Alphabet Inc’s cloud. Some of ByteDance’s top investors, including General Atlantic and Sequoia, will also be given minority stakes in those operations, one of the people said.
It is unclear whether Trump, who wants a U.S. technology firm to own most of TikTok in the United States, will approve the deal. The Committee on Foreign Investment in the United States (CFIUS), which reviews deals for national security risk, is overseeing the ByteDance-Oracle talks.
“User data protection and assurances around how the company’s algorithms push content to U.S. users are thoughtful components of a substantive solution, but whether they can change political outcomes is a much more difficult question,” said regulatory lawyer John Kabealo, who is not involved in the talks.
ByteDance plans to argue that CFIUS’ approval two years ago of China Oceanwide Holdings Group purchase of U.S. insurer Genworth Financial Inc offers a precedent for its proposal with Oracle, the sources said.
In that deal, China Oceanwide agreed to use a U.S.-based, third-party service to manage Genworth’s U.S. policyholder data. ByteDance will argue a similar arrangement with Oracle can safeguard TikTok’s U.S. user data, the sources said.
Oracle’s chairman Larry Ellison is one of the tech world’s few Trump supporters. His firm has significant technological prowess in handling and safeguarding data, but no social media experience as its clientele comprises companies, rather than consumers.