Who Wins in a Forced TikTok sale?

The short answer is - probably everyone. Hear me out.

Just when it appeared that an announcement about #TikTok's sale was imminent, #China made news of its own by declaring a new set of rules governing Chinese #technology #exports, including a mandate which requires #Chinese government approval for companies to sell certain #algorithms to foreign entities. Herein lies the rub - the bulk of TikTok's value is tied up in the app's algorithm.

The timing of the Chinese government's announcement is no coincidence. It was clearly designed to raise the stakes for President Trump, whose #executiveorder on TikTok is set to expire in a few weeks time, after which TikTok could be banned or....no one knows. Of course, President Trump could extend the executive order, but to do so during an election year in which both parties are trying to out do each other on China seems unlikely. As CNBC recently outlined, there seem to be four possible options on the table:

• The first option is that ByteDance could sell TikTok without the #algorithm, potentially expediting the sale but requiring the new owner to inject an alternative into the app. This decision would likely lower TikTok's value considerably.
• The second option is to negotiate an up to a year-long transition period with the Committee on Foreign Investment in the United States (#CFIUS), though its unclear if China’s rules would allow this in the required time frame.
• The third option is to seek approval from China to sell the algorithm to U.S. company chosen to purchase the app.
• The fourth option is for the new buyer to license TikTok’s algorithm from ByteDance. However, it’s unclear if U.S. authorities would be content with any continuing relationship between TikTok and the China-based ByteDance after the sale.

Right now, all eyes are on Beijing to see how Chinese President Xi Jinping and Bytedance CEO Zhang Yiming will proceed, as TikTok's American CEO, Kevin Mayer, recently resigned when he was cut out of the sale negotiations.

Now, back to the so-called "winners" in this latest geopolitical dust-up.

• TikTok Users - the likelihood of the app going completely dark in a few weeks is probably pretty slim. Even if that were to come to pass, such a disruption would probably be temporary. More likely, a deal is reached and a U.S. company takes over as the custodian of sensitive U.S. customer data.
• President Trump - If China fails to approve the algorithm sale and TikTok does, in fact, go dark, Trump will claim victory, having stood up to Beijing. The President may also claim that China was perhaps trying to "hide something" with all of these recent and unexpected regulatory roadblocks. This is probably the best possible scenario for him. If China approves the deal, particularly before the executive order's end date, but even a few weeks after the fact, Trump will also claim victory, having forced Beijing to bend to his will. On that front, he is not exactly wrong.
• Xi Jinping - In the immediate aftermath of Trump's executive order, Xi ran the risk of appearing reactive and weak. This most recent regulatory move by the Chinese government gives Xi a vote in the decision. A successful sale will allow Xi to save some face by claiming that China actually "approved" the deal, which will eventually reap billions of dollars for Zhang and ByteDance. Such a development would send a message to Chinese app developers that there is clear foreign demand for their products, even if they will eventually have to bow out and sell. If a sale does not occur, Xi will claim to have stood up for one of China's most important start-ups, which will go a long way with his already strong domestic constituency.
• Hawks Both in Congress and China - Both groups will use this incident to fire up their respective supporters. Regardless of whether a sale occurs or not, American hawks will claim victory in pushing back against Chinese cyber-theft and malign influence, particularly given national security concerns surrounding Chinese telecommunications companies, such as Huawei. For their part, Chinese hawks in Beijing will use this incident to reinforce their view that the United States is waging a comprehensive, multi-pronged campaign to inhibit China's peaceful rise. China hawks will also proclaim, incorrectly, that China has finally caught up to America in terms of technological prowess and ingenuity, having captured the minds (and pocketbooks) of millions of Americans.
• American Companies and Investors - Too soon to tell. Stay tuned.