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Illustration: Sarah Grillo/Axios

The best way to save ByteDance, the world's most valuable tech "unicorn," may be to break up ByteDance.

Driving the news: Some of the Chinese company's U.S. investors are discussing a carve-out of all or part of TikTok, which is under growing geopolitical pressures, according to The Information.

Backdrop: ByteDance was most recently valued at $75 billion by venture capitalists, and at around $95 billion in secondary market trades.

  • ByteDance's core product is a Chinese news content platform called Toutiao, but TikTok is its most popular global offering.
  • TikTok is viewed as a potential national security threat in the U.S., due to alleged data privacy issues tied to the Chinese government, and could soon be banned here (as it already was in India, which had been its top market).
  • Already, the House has voted to ban federal employees from having TikTok on their devices, the Defense Department recommended the same to its staff, and we've seen the same from at least one large company (or two, depending on how you view Amazon's flip-flop).
  • In short, TikTok risks becoming the next Juul — a wildly-successful, VC-backed consumer tech startup felled by targeted government intervention.

How would a carve-out work? This is the $75 billion question. Two sources tell me talks are more embryonic than preliminary, although they acknowledge that political threats could serve as accelerant.

  • For starters, it's unclear that carving out TikTok would make D.C. stand down. Particularly given that many of the U.S. firms reportedly involved, such as Sequoia Capital, have major China operations. Worries about code and conspiracy can't necessarily be solved via cap table.
  • Second, financing the deal could prove challenging. A total buyout would certainly cost double-digit billions, which is daunting for even the deepest-pocketed U.S. venture capitalists.
  • Private equity could get involved (KKR is among ByteDance's backers), but new investors would almost certainly need to be tapped (hi Silver Lake, we see you there). All without any guarantee of CFIUS approval or that the deal would solve TikTok's India and U.S. problems.

The bottom line: Buying TikTok sounds like an elegant solution, but may prove just as thorny as the problem itself.

Go deeper:

Go deeper

Dan Primack, author of Pro Rata
Updated Sep 28, 2020 - Politics & Policy

Unsealed opinion: Trump TikTok ban likely overstepped legal authority

Illustration: Sarah Grillo/Axios

A federal court judge on Sunday granted TikTok's request for a temporary restraining order against a ban by the Trump administration.

Driving the news: Judge Carl Nichols on Monday unsealed his opinion, in which he concluded that the ban seeks to regulate the exchange of "informational materials" — something that's expressly exempted from the law laying out the emergency powers Trump invoked.

Ina Fried, author of Login
Sep 29, 2020 - Technology

U.S.-China fight spreads to the chip factory

Illustration: Aïda Amer/Axios

The Trump administration's campaign against TikTok gets all the headlines, but the U.S. move last week to place restrictions on Semiconductor Manufacturing International Corp. (SMIC), China's top chipmaker, could end up making a greater difference.

Why it matters: Semiconductor analysts say SMIC represented China's strongest bid to build a domestic chip industry and bolster its tech independence. Sanctions that cut off its access to advanced manufacturing and testing equipment from the U.S. could seriously set that effort back.

Off the Rails

Episode 4: Trump turns on Barr

Photo illustration: Eniola Odetunde/Axios. Photos: Drew Angerer, Pool/Getty Images

Beginning on election night 2020 and continuing through his final days in office, Donald Trump unraveled and dragged America with him, to the point that his followers sacked the U.S. Capitol with two weeks left in his term. Axios takes you inside the collapse of a president with a special series.

Episode 4: Trump torches what is arguably the most consequential relationship in his Cabinet.

Attorney General Bill Barr stood behind a chair in the private dining room next to the Oval Office, looming over Donald Trump. The president sat at the head of the table. It was Dec. 1, nearly a month after the election, and Barr had some sharp advice to get off his chest. The president's theories about a stolen election, Barr told Trump, were "bullshit."