Analyzing TikTok's "Buyers"

An Opinion Piece By Tyler Kreiling

The TikTok Ban Cometh!

Over the past year I have heard more and more chatter from various different voices about the possibility of the U.S Government banning TikTok from the U.S market. Everyone from YouTube creators to political commentators has an opinion about whether or not we should ban TikTok, and why it's a good or bad idea. Now, in my mind, there are a lot of legal precedents and ethical issues with a government banning a piece of private IP, but the law has been passed so now the question is, how is this going to shake out?

So, what exactly does the "TikTok Ban" mean? As part of a new foreign aid bill passed on the Senate floor during its last session, it was decided that TikTok must sell to a U.S company in order to continue operations. The bill made a very clear ultimatum, Byte Dance must sell TikTok in 270 days or be banned. The bill allows Byte Dance an extension to that deadline, but only if they are in the process of selling. This news hasn't gone over well.

Byte Dance has Made Their Voice Heard.

Aside from the mass public backlash over the last few days from regular users and public officials about the ethical and legal implications of this decision, Byte Dance has made their intentions clear. They have no intention of selling the platform. The Chinese software company plans on challenging this decision in U.S Courts and threatens to shut down if they can't beat the decision.

It makes perfect sense to me from a legal perspective why TikTok wants to fight this bill. Like I mentioned earlier, banning an app, even for national security reasons, sets a dangerous precedent which could allow future public leaders to ban software for a myriad of reasons as long as they can justify it. Also, I have a strong belief in strict personal property rights, it's one of the vital building blocks of long living, stable countries, and this kind of legislation always makes me nervous. However, my opinions aside, the collection of investors and firms which have stepped forward to purchase the software over are incredibly interesting. I looked through each possible buyer mentioned in this article, and I wanted to share my thoughts.

Going Once, Twice, Sold?

IF TikTok was to go up for sale, who would be most likely to buy it? There is a huge hurdle for any would-be investor, thanks to its possible $100 billion valuation according to Dan Ives of Wedbush Securities, if the algorithm is included. You or I couldn't take a loan out tomorrow for that kind of cash and pickup one of the most popular software products on the market. However, that hasn't stopped a few investors from wanting to buy.

Rumble is by far the most interesting buyer. The video-sharing platform has made a public offer in the past for the platform. CEO Chris Pavlovski even posted a letter he sent to TikTok CEO Shou Zi Chew on X, about the firm's desire to buy. Of all the protentional buyers, if TikTok was to go up for sale, I would prefer this to be the eventual owner. Of all the potential buyers Rumble has the largest motivation to keep the platform as place where small time creators can express themselves. However, does Rumble actually have the ability to buy? In previous articles I've how borrowing costs are going to rise in 2025 which means Rumble will need to put up more of the capital if they want to buy TikTok. Rumble has been operating at a loss since 2020, which doesn't leave much cash to gather new debt or invest in a $100 Billion platform, especially when we take into account the other, cash flush buyers who've stepped forward.

Kevin O'Leary has made cash offer for the platform. In March he mentioned he's getting together a group of investors to make a 20 to 30 billion dollar offer for TikTok. This number is nowhere near the number presented by Wedbush Securities, but considering the probability that the sale would not include the algorithm, they feel it's fair. O'Leary is the most likely buyer if TikTok was to go up for sale, since he's been vocal about buying it and actively collecting the resources to do so. Steven Mnuchin has also made a similar comment, but has yet to set an actual bid, and it's yet to be seen Mnuchin can pool together the same level of capital that O'Leary can.

Bobby Kotick has thrown his "hat in the ring" to purchase the platform. Although he doesn't have the capital that some of later potential buyers have in this article, his exit last year from Activision has left him with a sizeable payout. Kotick has also commented that he is trying gather investors to buy the platform, but in my opinion, he may be late to the party, if TikTok changes their position on selling the platform, O'Leary and other investors will bid him out.

Walmart and Oracle are the most concerning potential buyers for the platform. The two Fortune 500s pooled their resources together to buy the platform back in 2020, before it was stopped by the Biden Administration due security concerns. This pair of firms is closer to buying the platform than any of the previous potential buyers thanks to a 20% share of TikTok the two firms acquired prior to IPO. In my mind, if Walmart and Oracle were to make a bid again, we should all be concerned. The two firms own close to $390 billion in assets as of 2023 and adding another $100 billion raises the very real possibility of another Meta-Style takeover. Although it's a possibility, neither Walmart or Oracle have communicated a new desire to buy, which makes me rest a little easier.

So, what happens now?

Byte Dance's clear position on the TikTok ban means we can reasonably expect the following scenario, assuming no unexpected circumstances. Over the rest of the year, we'll see several rounds of legal challenges on the ban, which will lead to one of two outcomes. If Byte Dance wins, then we will see TikTok continuing to operate as it has, nothing will change, expect for more bad blood between the U.S and China. If they lose, TikTok will leave the major app markets, likely leading to more people pirating and sideloading the platform. TikTok is the third most popular mobile app in 2024, so I doubt it's going anywhere, but like mp3s and CDs before it, TikTok will join the U.S shadow economy. Either way the actual mobile app ecosystem in the States won't change all that much.

That being said, if I was sitting across the desk from TikTok's CEO advising them on what to do, my advice would be simple sell, sell, sell! Why? Because the general sentiment is that, if TikTok was to sell, it would likely be without the proprietary algorithms, which means investors are willing to buy a shell of a platform for $30 billion, and Byte Dance can go on to make the next TikTok. Also, it's going to be less of a legal headache to remove the algorithms from the forced sale, than to fight the sale itself. It will be interesting to see how this ban is going to actually come to pass over the next few months, and if this ban will survive a judicial review. However, in my mind, we would be naive to assume that a ban or forced sale will stop US consumers from getting their TikTok fix.