A tentative deal between the U.S. government and Bytedance, which would have the Chinese company retaining 80% stake and Walmart and Oracle getting 20% ownership of a newly founded TikTok Global, has been up in the air with both President Trump and the Chinese government having doubts of the security of the deal. Yahoo Finance’s Final Round panel discuss the details of the tentative deal and what it could mean for all the companies involved as investors wait for what’s the come next.
MYLES UDLAND: Let's turn our attention now to Oracle and Walmart's deal for TikTok, or maybe it wasn't a deal for TikTok. So as of right now, there are, I guess, doubts over whether Oracle's investment in TikTok for them to own 20% of the business will actually come through, if indeed, ByteDance, which is TikTok's Beijing-based owner, contains-- retains control of the company. Because President Trump said that he does not want ByteDance to have ownership over TikTok's US business. Though, at this point, it does not appear that it is definitely confirmed from both the ByteDance and Oracle sides that ownership of TikTok's US business will, indeed, transfer from ByteDance to Oracle.
Melody Hahm, like we talked about this story last week, and the week before that, and the week before that, and every time we discuss it, we sort of landed on, well, we'll get back to you when something changes. Or, you know, maybe this won't actually happen. And even though there was all this flurry of, oh, now, it's actually done, I don't really think it has changed. I'm not really sure anything has been accomplished yet. And you sort of look at this story and you think, well, there's an election in like 40 days and there probably won't be resolution before then, at the earliest, and maybe not ever, if Trump doesn't get reelected.
MELODY HAHM: Yeah, and getting a little bit more granular here, the current sort of breakout is Oracle would own 12.5%, Walmart would own 7.5%, together, they would have one fifth of TikTok, and as you mentioned, which is owned and based in Beijing, China. So I think this whole sort of narrative takeover by Trump almost making it sound like TikTok was a US company that somehow China got control of, to be honest, I think is how a lot of Americans perceive it, right. Why are we suddenly being thrust with this Chinese ownership? This was always a Chinese company.
So for this to take shape in this way, and for Trump to be saying today on "Fox and Friends" that he would not approve a deal, even though he was very enthusiastic about this 20% ownership as of yesterday, and Vanessa Pappas, the interim head of TikTok, did write a blog post yesterday specifically saying they're very happy with the progress, there will be a pre-IPO round that a lot of American investors can get a part of. But I do want to point out a tweet from just a couple hours ago from Hu Xijin, who is the "Global Times," which is, of course, a Chinese-state-affiliated media organization, he just tweeted saying, quote, based on what I know, Beijing won't approve current agreements between ByteDance, TikTok's parent company, and Oracle and Walmart because the agreement would endanger China's national security interests and dignity. So it's the same sort of argument that, essentially, the Trump administration is saying from the US perspective.
So to your point, Myles, regardless of how much bloviating and how much of this sort of huffing and puffing that the US government can do, ultimately, because this is a Chinese company, I don't think that the Beijing government will be able to give their approval. This is not the kind of deal, even structured currently with that 20% ownership stake. And given Trump's fighting words, ultimately, I'm not quite sure we've made any progress at all over the last 48 hours.
MYLES UDLAND: Yeah, and I think the more this drags on, Mel, the more that I'm also wondering-- and we have not really asked this question at all-- which is like, is TikTok such a great business that everyone's going crazy? I mean, I'm serious. It's-- a lot of kids are on it right now.
It's very buzzy right now. But the history of social media networks not owned by Facebook succeeding over the long-term and having the kind of durable ad business that everyone is losing their minds over is not very good. And I think that is also worth wondering at this point.
MELODY HAHM: Yeah, that's a fair question, especially, you know, currently, as I understand it, there are about 20,000 employees across the United States who are working on this business. And my understanding is that they are continuing to try to recruit employees from Facebook, at least here on Silicon Beach in Los Angeles. There's been a lot of poaching efforts and attempts that have been happening. So, to your point, ultimately, can reels, as much as we first met it with a lot of scrutiny, a lot of skepticism, OK, it's just a copycat, that's what Facebook is really good at. They're very good at doing a carbon copy of Snap, very good at doing a carbon copy of whatever TikTok is doing.
It doesn't matter, honestly, that the watermark is there. Yes, the product is really great. Yes, the algorithm is superior in my mind to what is being fed to you and how you get longer engagement and user time. But at the same time, to your point, Facebook is known to really understand the ecosystem and understand its competitors to a scary degree, right. So in this case, I wouldn't say, even if TikTok does get banned, even if Trump does sort of impulsively say, hey, I'm not good with this deal, I don't really anticipate that many things will change.
And, of course, Facebook will continue to dominate. I do want to point out one thing here in terms of Trump's sort of docket of issues, as we know with the sad passing of RBG, I do feel like Trump's attention may have been swayed a little bit, right. As you think about his priority list prior to the election, that, of course, probably takes precedence to some degree, whether he can even get a nominee out there. So now that there's another issue on the table right now, never mind the coronavirus pandemic, I anticipate that, perhaps, this could get a back seat, as he's trying to juggle what makes sense for him as he tries to get re-elected.