KUALA LUMPUR – TikTok parent company ByteDance would rather shut down the app than sell it if it exhausts all legal avenues to challenge a proposed ban of the social media platform in the US, sources said.
According to Reuters, the sources highlighted that ByteDance considers the algorithms integral to its overall operations, making a sale of the app along with its algorithms highly improbable.
While TikTok represents a small portion of ByteDance’s revenues and daily active users, the company is inclined to opt for a shutdown in the US instead of a sale to an American buyer in a worst-case scenario.
This decision is primarily driven by the desire to retain control over its core algorithm, a sentiment echoed by sources close to the parent company who preferred anonymity due to their non-authorisation to speak to the media.
ByteDance declined to provide a comment on the matter. However, it reiterated its stance against selling TikTok in response to speculation raised by media reports.
TikTok’s CEO, Shou Zi Chew, expressed confidence on Wednesday that the social media giant would prevail in its legal battle against legislation signed into law by US President Joe Biden.
This legislation aims to prohibit the use of TikTok, a beloved short-video app used by about 170 million Americans.
The legislation, prompted by concerns over data security and surveillance, sets a deadline for a potential sale of TikTok’s US operations, with the possibility of an extension if ByteDance demonstrates progress.
Despite TikTok’s significant presence in the US market, ByteDance’s primary revenue streams remain centred in China, particularly through apps like Douyin.
Valuing TikTok accurately proves challenging for investment bankers due to limited access to its financial data. ByteDance’s overall revenues surged in 2023, further underscoring the company’s financial robustness.
TikTok’s core algorithms, shared with ByteDance’s domestic platforms, are considered a vital asset, making divestment a complex endeavour.
China has previously signalled opposition to the forced divestment of TikTok, citing regulatory hurdles and the protection of technological assets.
Beyond algorithms, TikTok’s main assets encompass user data and operational infrastructure.
While interest has been expressed in acquiring TikTok’s US assets, excluding algorithms, ByteDance may face difficulties in attracting potential buyers.
ByteDance’s valuation remains substantial, reflecting investor confidence in its business model and growth prospects. – April 26, 2024