- The Biden administration and CFIUS are pushing for a sale of TikTok in the US.
- Analysts said a few companies like Microsoft, Oracle, and private-equity firms are likely buyers.
- The Chinese government could also block a TikTok sale outright before bidding kicks off.
US officials are demanding that TikTok divest its American business from its Chinese owners in a move that some believe would reduce its potential risk to national security.
But the list of companies that would actually consider buying TikTok is small, experts told Insider.
The app would cost more than most companies would be willing to spend, particularly during an economic downturn, with analysts estimating that the price tag for its US assets could fall anywhere between $40 billion and $100 billion. One viable option could be a sale to a private-equity firm or consortium of firms, which would keep TikTok as a standalone company and could take it public via an initial-public offering, a few analysts said.
Experts also noted that big tech companies that already run social-media businesses, such as YouTube parent Google Inc. or Meta Platforms, which owns Facebook and Instagram, would be less inclined to bid because they would face antitrust scrutiny for buying a competitor.
“We’re talking about a pretty big price tag, and so who would actually be able to buy it?” Bernstein’s senior analyst Mark Shmulik told Insider. “It can’t be somebody like Google because they have YouTube, which would be being anticompetitive. It certainly can’t be Meta. You’re left with, who’s got the pockets to go do so?”
Of course, China could block the path to any sale of TikTok’s US assets before bidding even starts.
Big tech companies could acquire TikTok, but it didn’t work last time
If the Chinese government does give ByteDance permission to sell TikTok’s US business, several analysts pointed to Microsoft or Oracle as possible bidders.
Shmulik said Microsoft stood out in particular because it already demonstrated a willingness to spend big on consumer-entertainment assets, such as its roughly $70 billion bid for gaming company Activision Blizzard. That deal is still pending and currently under scrutiny from UK antitrust watchdogs.
Patrick Moorhead, CEO of Moor Insights & Strategy, also called out Microsoft as a potential buyer.
“Microsoft doesn’t have a credible non-gaming platform for social,” Moorhead said. “I think Microsoft would be one of the only big money, big company possibilities.”
Another possible bidder the analysts flagged is Oracle, which has been working closely with TikTok on its efforts to guardrail its US data via its Project Texas initiative.
If that sounds like déjà vu, it’s because the company already put together a bid for the app in 2020 alongside Walmart in the wake of the Trump administration’s attempt to force a TikTok sale. That deal fell apart after the Biden administration took office.
But Oracle may not be willing to spend big on TikTok this time around, particularly since the app’s cost has likely gone up and Oracle doled out $28 billion in June to buy medical-records giant Cerner.
It’s unclear how much TikTok’s US business would cost
Estimates for TikTok’s US price tag vary among analysts.
Shmulik estimated that TikTok’s US business could be priced between $60 billion and $100 billion. Bloomberg Intelligence’s Mandeep Singh and Damian Reimertz pegged the cost closer to $40 billion to $50 billion.
The company’s value would likely drop precipitously if the Chinese government barred ByteDance from selling TikTok’s content-recommendation algorithm to a US entity, viewed by many as the company’s secret sauce. China views the transfer of TikTok’s algorithm into another country’s hands as a national security concern, said David Glancy, a professor at the Institute of World Politics.
“‘If there is any indication that the algorithm would not be allowed, or the resources that actually helped to design and implement the algorithm can not come on board in the US operations alone, then yeah, I assume the value of TikTok would be discounted,” Ali Mogharabi, senior equity analyst at Morningstar, told Insider.
He said TikTok’s algorithm keeps its users engaged with the app, and therefore attracts the advertisers that drive its revenue.
Wedbush’s Dan Ives echoed that, and said most companies wouldn’t want to buy TikTok from ByteDance if the sale left out TikTok’s algorithm.
A spin off seems like the most viable option for TikTok, if China doesn’t shut it down first
A spin-off of TikTok’s US business into its own entity, potentially powered by private-equity firms, may present the best path forward, though the Chinese government may block that option as well.
“I think this is right for a private-equity deal where you have multiple companies throwing in money,” Moorhead said. “I think this gets sold to a holding company and likely private equity and this company goes out and does an IPO.”
Bloomberg Intelligence’s Singh said a private-equity bid would likely involve multiple buyers. “We are talking about at least four or five big players involved,” Singh told Insider.
Sequoia Capital is one potential PE buyer, said Morningstar’s Mogharabi. Sequoia Capital is an investor in TikTok’s Chinese parent company and supported Oracle’s bid for TikTok in 2020, according to a Wall Street Journal report from that time.
A spin out would appease the US government and their national security concerns, but it’s unclear how China would react, Shmulik said.
The Chinese foreign ministry said on Thursday that “data security should not be used as a tool to abuse the national security concept and state power to hobble foreign companies.”
Ultimately, separating TikTok’s US operations, whether in a sale to a big tech firm or a spin off, is complicated. It would also kick off a long separation process, said Lindsay Gorman, a senior fellow for emerging technologies at the Alliance for Securing Democracy at GMF.
“It’s not gonna be just a clean break,” Gorman said. “These systems are really enmeshed.”