Illustration: Aïda Amer/Axios

While its Big Tech rivals were testifying in front of a congressional antitrust committee last week, Microsoft was negotiating what could be the largest — and most politically perilous — tech acquisition of 2020.

The state of play: The hullabaloo surrounding Microsoft picking up TikTok has undergone a flurry of twists and turns over the weekend, as both the White House and the tech giant reacted in real time.

Here's what happened:

  • Reports emerged that Microsoft was in talks to buy the U.S. operations of TikTok from ByteDance, possibly with ByteDance retaining a minority stake.
  • President Trump said he planned to ban TikTok for (still unspecified) national security concerns.
  • We reported Saturday morning that Trump had a proposal "on his desk" whereby Microsoft would buy 100% of TikTok U.S.
  • White House sources said internal factions were still battling out what Trump should do.
  • Trump and Microsoft CEO Satya Nadella spoke yesterday, following which Microsoft issued a fairly detailed statement of the deal parameters. Trump himself hasn't yet commented (that could change any moment), but Reuters reports that he's given ByteDance 45 days to strike a formal agreement.

Before continuing: Yes, it is abnormal for a U.S. president to dictate the timeline (and maybe terms) of a U.S. company-led acquisition. It also remains unclear what mechanism Trump planned to use to block TikTok.

  • This is not playing very well on Chinese social media, where ByteDance's CEO has been accused of betraying his country.
  • “It’s less about this particular app and more about what this app can be used to leverage in the future,” meaning new apps and possibly the collection of more sensitive data, a source familiar with the CFIUS process tells Axios' Ashley Gold.

What comes next? Negotiation, and lots of it.

  • Microsoft and ByteDance have not yet agreed on a price, per a source familiar with the situation.
  • Microsoft said in its statement that its plans would be to own and operate TikTok in the U.S., Canada, Australia, and New Zealand. Either that list will expand, or Microsoft and ByteDance will need to work out content sharing between the Microsoft-owned version of TikTok and whoever ends up owning the rest (particularly places like the U.K. and Japan). And obviously this would impact price.
  • Microsoft will still need to prove to U.S. regulators (and to ByteDance) that it can basically reengineer the TikTok code, since the White House effectively wants new software in addition to a new mailing address.
  • Microsoft also said it may invite other U.S. investors into the deal “on a minority basis.” Unclear if this would involve letting existing ByteDance backers like General Atlantic roll over their shares, but it does seem to indicate that Microsoft may plan to operate TikTok as an independent entity that can eventually go public on its own.

A wildcard: Amazon.

  • I’ve got no intel that Amazon wants to buy TikTok, but I’d be surprised if it’s not at least kicking the tires. It’s the only other U.S. company with the cash, tech capacity, and lack of obvious antitrust issues that could get it done.
  • Plus it has an obvious interest in social content, as evidenced by its Twitch purchase, and its involvement could help at least bid up the price for Microsoft.

The bottom line: Microsoft’s market cap is up around $60 billion in early trading, which means it might have already “paid off” this deal.

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