Aug 4, 2020 - Economy

Trump's new TikTok threat


Photo illustration: Aïda Amer/Axios. Photo: Jim Watson/AFP via Getty Images

President Trump said twice Monday that the U.S. Treasury would need to get a portion of the sale price of TikTok, as a condition of regulatory approval.

Why it matters: This is akin to extortion — the sort of thing you'd expect to hear on a wiretap, not from the White House in front of reporters.

  • Trump has claimed that his threats to ban TikTok, and the furious M&A process it spawned, are based on national security concerns.
  • But, this is inconsistent with requiring payment for deal approval, even if such a thing were legal. Either a sale agreement satisfies national security criteria or it doesn't.

Between the lines: That's because Microsoft isn't the only party kicking TikTok's tires, as Trump also said. Multiple sources tell Axios that Apple has expressed interest, albeit no sources inside of Apple, and that at least one other strategic has expressed interest.

  • It would be an unusual deal for Apple, given that TikTok is a cross-platform app, and a bigger political headache than Tim Cook may want (both here and in China). But the company certainly has the cash on hand.
  • An Apple spokesperson told Axios there are no discussions about buying TikTok, and the company isn’t interested.

The big picture: It obviously behooves current TikTok owner ByteDance for there to be multiple suitors when it comes to pricing. Multiple suitors also could help the White House secure concessions.

  • Private equity is also circling, including some firms that don't have current stakes in ByteDance. But no sources have noted one that's terribly optimistic that they can pull it off without finding an insider or major strategic with whom to partner.

Flashback: It's reminiscent of how Huawei was used as a chip in U.S.-China trade negotiations, as if its perniciousness waxed and waned with the number of soybeans China agreed to buy.

  • The president's comments came shortly after an "Axios Re:Cap" interview with Peter Navarro, in which the White House's top trade adviser suggested that a buyer may have to offer different concessions, such as reducing non-TikTok business activities in China.

The state of play: There is no way ByteDance would pay a portion of sale proceeds to U.S. Treasury, if only because of the PR ramifications in China.

  • Even if ByteDance would allow TikTok's buyer to codify such a payment in its sale agreement, which is doubtful, it's (almost) inconceivable that any U.S. corporation would do so. It's an Action Park-level slippery slope.

The bottom line: There is no guarantee a deal will be struck by Trump's Sept. 15 deadline, let alone one on the terms he claims to require.

  • If not, he'll either have to ban a service beloved by tens of millions of voters, less than two months before the election, or kick the can down the road.
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