ByteDance to remain in control of TikTok as it contests $5bn fee claim

The company played down speculation it is giving up control of valuable technology and assets after striking a deal with Oracle and Walmart

ByteDance says it will remain in control of a hived-off TikTok Global business. Reuters

ByteDance emphasised it will remain in control of a hived-off TikTok Global business, appearing to contradict President Donald Trump’s statements about how the new entity will be directed by Americans and pay an unusual $5 billion (Dh18.35bn) fee to the US government.

The world’s most valuable start-up sought to play down speculation it is giving up control of valuable Chinese technology and assets after striking a deal with Oracle and Walmart to create TikTok Global. ByteDance will retain full control of its prized social media algorithms and allow Oracle only limited access to view source code for “safety” purposes, the company said in a statement posted to its domestic news service Toutiao on Monday.

Walmart chief executive Doug McMillon will join TikTok’s board. But ByteDance founder Zhang Yiming and the Chinese company’s current directors – which include Sequoia China’s Neil Shen and General Atlantic’s William Ford – will reprise their roles. The statement made no mention of Oracle getting a seat, even though ByteDance said Larry Ellison’s company is slated to own 12.5 per cent after a round of funding before TikTok Global goes public within a year. Walmart and Oracle have said American citizens will take up four of the five board seats for TikTok Global.

In a blog post entitled “clarifying groundless rumors about TikTok”, ByteDance contested Mr Trump’s assertions his government will get $5bn as part of the deal. It said that figure was just an estimate of the amount of taxes TikTok Global would pay over several years if the business proved successful.

TikTok has emerged as a top target in Mr Trump’s effort to crack down on China ahead of the November US elections. Tensions between Washington and Beijing are escalating as his administration wages a campaign that has also ensnared Tencent, whose WeChat app faces a similar ban.

ByteDance’s statement raises more questions over an arrangement cobbled together over just a few weeks to prevent the banning of the popular social video platform, which the White House accuses of spying on Americans and potentially influencing the elections. The Chinese company is seeking a valuation of $60bn for TikTok Global, in which ByteDance may end up owning as much as 80 per cent after Oracle and Walmart invest.

Mr Trump has previously said the White House deserves a cut of the deal for making it possible. On Saturday, he said the companies agreed to pay $5bn to bankroll an education fund that would teach American children “the real history of our country”. TikTok will pay more than $5bn in “new tax dollars to the US Treasury” and develop an AI-driven online video curriculum, according to a joint announcement from Oracle and Walmart.

But ByteDance said the promised tax payment had nothing to do with the deal.

“As for the so-called $5bn tax to the US Treasury, that refers to an estimate of the corporate income tax and other taxes TikTok will have to pay in coming years as part of its business development,” ByteDance added. “TikTok is confident in its future but the actual tax amount will have to be determined in accordance with the actual state of the business and American tax structures.”

While Mr Trump is portraying the agreement as a victory, the business remains under Chinese control. ByteDance said on Monday, Oracle – which won the right as part of the transaction to review TikTok’s source code for security threats – will only review the software in a controlled environment. ByteDance cited past examples such as Microsoft’s transparency center in China, which lets experts review code in a designated location only.