The potential sale of TikTok to an American buyer has become one of the most complex and high-stakes business deals in recent memory, with high-profile contenders like Elon Musk, Oracle Chairman Larry Ellison, creator star MrBeast, tech CEOs, and others linked to the potential sale.
At the heart of the issue are competing geopolitical interests, regulatory hurdles, and the intrinsic value of TikTok as a cultural and technological powerhouse.
Here are the key challenges involved in executing this sale successfully, according to interviews with media executives and investors.
Ownership and leadership structure
One of the most immediate challenges is determining how ownership and leadership would be structured if an American company acquired TikTok.
A 50/50 joint venture, which has been floated as a potential solution, brings inherent governance complexities, according to Oaklins DeSilva+Phillips partner Jay Kirsch. For a company of TikTok’s scale and rapid growth, centralized decision-making is crucial.
Shared responsibilities between U.S. and ByteDance executives could lead to inefficiencies in areas like content moderation, data governance, and security protocols.
The deal would also need to satisfy the Committee on Foreign Investment in the United States (CFIUS) and other regulators to ensure ByteDance does not retain residual control that could pose national security risks.
Without clear leadership and operational control, the sale’s primary purpose—addressing national security concerns—could be undermined, according to WY Partners managing director William Ritchie.
“You can see a strategic buyer being comfortable pricing in the lack of access to the algorithm given the potential as a media platform alone,” Ritchie said. “But the question is whether that would fulfill the Department of Justice’s reason for seeking the sale in the first place.”
Investor equity and exit strategy
Negotiating the role of investors, particularly those with significant ties to China, is another critical challenge.
U.S.-based investors like Sequoia and General Atlantic, who already hold stakes in ByteDance, may push for a greater role in TikTok’s future, according to Savage Ventures founder Sam Savage.
However, determining which investors cash out and which retain stakes could lead to disputes, especially if Chinese-linked investors resist relinquishing their influence.
Valuing TikTok accurately is no small feat. The platform’s meteoric growth and reliance on a proprietary algorithm, which ByteDance may refuse to transfer, make it difficult to reach a consensus on its worth. TikTok’s valuation has been estimated as high as $200 billion, making any deal involving partial ownership an astronomical investment.
Political and business implications
The sale of TikTok is deeply politicized, with figures like Donald Trump and Elon Musk potentially influencing outcomes.
Trump’s involvement in particular could alienate TikTok’s predominantly young user base, leading to brand erosion, according to Savage. Advertisers, wary of controversy, might reduce their spending on the platform if it becomes a political lightning rod.
Internationally, an aggressively enforced sale by the U.S. could provoke retaliatory actions against American companies operating abroad, according to sources. Such a move could set a dangerous precedent, escalating global tensions around cross-border technology operations.
Algorithm ownership and licensing
TikTok’s algorithm, the recommendation engine driving its immense popularity, is its most valuable asset.
ByteDance’s reluctance to include the algorithm in a potential sale complicates matters significantly. Without it, TikTok’s value could plummet, according to Kirsch.
One potential workaround could involve licensing the algorithm, but this would create ongoing dependencies on ByteDance, raising further concerns about national security and operational autonomy. Alternatively, building a new algorithm from scratch would be a costly and time-consuming endeavor, likely degrading the user experience.
Transitioning TikTok’s U.S. operations from ByteDance’s shared infrastructure would also be a technical and logistical nightmare, fraught with security risks and enormous costs.
Broader geopolitical considerations
China’s reaction to the sale could prove to be a significant roadblock.
Chinese regulators have previously designated key technologies as critical to national security, requiring export approval. If Beijing views the sale as a threat to its technological ambitions, it could block or hinder the transaction, according to Savage.
Additionally, TikTok’s global footprint adds another layer of complexity. Decisions made about its U.S. operations could ripple across markets where TikTok faces scrutiny, such as Europe and India, potentially affecting its ability to operate in these regions.
