Trump's Executive Order to Purchase TikTok
The long-awaited agreement to transfer control of TikTok’s U.S. business from its Chinese parent company, ByteDance, to a consortium of American investors has drawn significant attention across political, financial, and legal circles. The deal, finalized under an executive order by President Trump after months of negotiation, is intended to address national security concerns about Chinese influence over American user data and TikTok’s recommendation algorithm. The deal stems from bipartisan concerns about Chinese tech influence. President Biden signed a law requiring ByteDance to divest TikTok’s U.S. operations or face a ban, and Trump ultimately executed the divestment order. However, legal scholars argue that Trump’s repeated deadline extensions and executive maneuvers raise constitutional issues under the “Take Care” clause, which mandates faithful execution of the law.
The deal values TikTok’s U.S. operations at $14 billion, a figure that has sparked considerable criticism. Analysts argue the valuation grossly underestimates the company’s worth, given that TikTok U.S. has 170 million users and generates over $10 billion annually in revenue. The implied price-to-sales ratio of 1.4x is far below industry peers—Meta’s stock trades at roughly 10x and Alphabet at 8x. Critics have labeled this the “most underpriced tech buyout of the decade,” pointing out that the buyers, especially Oracle, are getting an extraordinary bargain. For ByteDance and its investors, however, the deal may look like a strategic misstep that leaves substantial value on the table.
To comply with U.S. national security requirements, the new joint venture will ensure majority American control. ByteDance’s ownership will drop below 20%, although it will remain the largest minority shareholder. The new board will feature seven members: six U.S.-appointed directors and one ByteDance representative, who will be excluded from the all-important security committee. The deal’s leading investors include Oracle and private equity firm Silver Lake, with Oracle positioned to play a central role in securing user data. Political connections are also notable: Oracle co-founder Larry Ellison is a prominent Trump ally, and figures such as Rupert Murdoch and Michael Dell were mentioned as potential investors. Foreign capital also features in the deal, with MGX, an Abu Dhabi state-backed fund, set to acquire 15% of the company and a board seat. While this provides fresh funding, critics question whether introducing another foreign stakeholder truly aligns with the deal’s stated security goals.
The most sensitive issue—the recommendation algorithm—has been addressed through a licensing arrangement. The U.S. joint venture will license TikTok’s algorithm from ByteDance, but Oracle will oversee retraining it with American data. Oracle’s role extends to monitoring and securing user data to ensure that it cannot be accessed by China. The White House has insisted this arrangement severs Chinese government influence, though some skeptics remain unconvinced. Because ByteDance still owns the underlying algorithm, critics worry that hidden dependencies may linger. The transaction must close by December 16, though the White House is prepared to extend the deadline by 120 days to finalize regulatory approvals. Trump has claimed that Chinese President Xi Jinping signed off on the arrangement, though neither ByteDance nor Beijing has publicly confirmed this.
The Deal at a Glance
The Art of the Deal?
While the deal resolves immediate concerns about TikTok’s future in the U.S., it opens a host of political, economic, and legal controversies that could reshape the global tech landscape. The most glaring controversy lies in TikTok’s valuation. If critics are correct that the U.S. operations were sold for a fraction of their true worth, ByteDance and its investors face billions in potential losses. More broadly, the deal sets a precedent for forced divestitures of foreign-owned technology firms. Companies operating internationally may now fear political intervention could strip away assets at distressed valuations.
The inclusion of MGX, a fund tied to the United Arab Emirates, has raised eyebrows. On one hand, U.S. leaders justified the divestiture on the grounds of eliminating foreign influence. On the other, they welcomed another non-American stakeholder onto the board. To critics, this contradiction undercuts the national security rationale and suggests political convenience may have guided investor selection. Even with the licensed algorithm arrangement, doubts remain about whether ByteDance truly loses influence. The company still owns the underlying technology, and skeptics warn that retraining may not fully sever dependencies. Some fear the arrangement is a cosmetic fix rather than a genuine safeguard.
The deal also highlights the blurred line between executive power and the rule of law. Trump’s repeated deadline extensions and unilateral decisions to reshape the deal invite accusations of constitutional overreach. Critics say this demonstrates how national security justifications can be wielded to consolidate political power. Moreover, the involvement of investors aligned with Trump raises concerns about whether political favoritism influenced who gained access to one of the decade’s most coveted assets. Allegations about MGX’s ties to ventures involving the Trump family further cloud the transparency of the process.
The deal underscores the fragility of U.S.-China tech relations. Even if finalized smoothly, it signals Washington’s willingness to treat Chinese technology firms as national security threats subject to forced breakups. For Beijing, this sets a worrying precedent and could invite retaliation against U.S. firms operating in China. The result could be a further decoupling of the world’s two largest economies in the tech sector.
This article was co-created with AI.