US tech investors are reportedly trying to buy a majority stake in Chinese-owned social media phenomenon TikTok to head off White House security concerns about the video-sharing app.
Investors, led by the venture capital firms General Atlantic and Sequoia Capital, are reported to be in discussions with US regulators about an option to acquire the company, according to two reports.
In recent days, Donald Trump’s re-election campaign placed ads on Facebook suggesting that TikTok was “spying” on US users – a claim parent company ByteDance has denied.
As the White House reviews whether to take action against TikTok, factions within US state and justice departments are reportedly in favor of banning the app, which sits on the smartphones of millions of Americans.
Larry Kudlow, Donald Trump’s top economic adviser, said last week that no decisions had been made. Kudlow said that TikTok could “pull out” of the Chinese holding company and “operate as an independent American company”.
On Tuesday, the company said it plans to create 10,000 US jobs over the next three years, a steep hiring increase over the 1,400 employees it currently manages after tripling its workforce this year.
The announcement came after by Senate Democratic leader, Chuck Schumer, as well as the Republican senators Tom Cotton and Josh Hawley, voiced security concerns over data from US consumers finding its way to the Chinese government.
On Monday, as part of a series of amendments to the National Defense Authorization Act, House lawmakers voted 336-71 to bar TikTok from US government devices.
As US-China tensions rise, TikTok has sought to distance itself from Beijing. TikTok pulled out of Hong Kong earlier this month, soon after India banned it, and is looking at establishing a headquarters outside of China. In the US, the company recently hired Disney veteran Kevin Mayer as chief executive, has begun beefing up lobbying efforts.
But it is unclear what price investors might agree to pay for the company. ByteDance was valued at $75bn in 2018 but TikTok is not believed to be profitable. At the same time, months of Covid-19 pandemic lockdown have sharply boosted downloads of the app to over 2bn.
“It is young and it is early on in the monetisation process,” one potential investor told the FT. “But it is a unique asset.”
TikTok was downloaded 315m times from January through March, according to Sensor Tower – beating any other app ever for a single quarter.
Separately, Facebook’s Instagram confirmed Thursday is preparing to launch Reels, a direct TikTok competitor, designed specifically for 15-second short-form content.
The US launch, scheduled for early August, comes shortly after Reels debuted in India soon after TikTok was banned from that market. It has also been tested in Brazil, France and Germany.
“The community in our test countries has shown so much creativity in short-form video, and we’ve heard from creators and people around the world that they’re eager to get started as well,” a Facebook spokesperson confirmed in a statement.