TikTok just closed a deal that looks impressive on paper but comes with some interesting fine print. Oracle, Abu Dhabi investment firm MGX, and private-equity firm Silver Lake are acquiring a substantial stake in TikTok's US operations, but according to an internal memo, they won't be calling the shots where it matters most.
The Deal's Unusual Structure
The three investors are getting a combined 45% stake in a US joint venture expected to close in late January. Sounds significant, right? Here's the twist: their role will focus primarily on national security-related tasks like data management and algorithm training, not the money-making engines of the business.
ByteDance, TikTok's current owner, will maintain ownership of just under 20% of the US business while retaining control over key business lines including e-commerce and advertising. In other words, ByteDance keeps the steering wheel for the most lucrative parts.
What the CEO Actually Said
TikTok CEO Shou Chew spelled it out clearly in the memo: the new investors won't control core business lines like TikTok Shop or ad sales, though they can still participate in the profits.
"The US joint venture, built on the foundation of the current TikTok US Data Security (USDS) organization, will operate as an independent entity with authority over US data protection, algorithm security, content moderation and software assurance, while TikTok global's US entities will manage global product interoperability and certain commercial activities, including e-commerce, advertising, and marketing," Chew wrote in the memo, as quoted by Business Insider.
Why This Arrangement Matters
This structure addresses US government concerns about data privacy and security without forcing ByteDance to completely surrender control. The new investors handle the security-sensitive stuff that regulators worry about, while ByteDance continues managing the commercial operations and strategic direction.
It's a creative solution that might become a template for other tech companies facing similar national security scrutiny. ByteDance gets to maintain its influence over the platform's most valuable assets, investors get exposure to TikTok's growth, and Washington gets oversight on security matters. Whether everyone stays happy with this arrangement long-term remains to be seen.