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Breaking up TikTok's billion-dollar parent company could be the best way to save it

22 July 2020
 Dan Ackermann

The best way to save ByteDance, the world's most valuable tech "unicorn," may be to break up ByteDance.

Driving the news: Some of the Chinese company's U.S. investors are discussing a carve-out of all or part of TikTok, which is under growing geopolitical pressures, according to The Information.

Backdrop: ByteDance was most recently valued at $75 billion by venture capitalists, and at around $95 billion in secondary market trades.

  • ByteDance's core product is a Chinese news content platform called Toutiao, but TikTok is its most popular global offering.
  • TikTok is viewed as a potential national security threat in the U.S., due to alleged data privacy issues tied to the Chinese government, and could soon be banned here (as it already was in India, which had been its top market).
  • Already, the House has voted to ban federal employees from having TikTok on their devices, the Defense Department recommended the same to its staff, and we've seen the same from at least one large company (or two, depending on how you view Amazon's flip-flop).
  • In short, TikTok risks becoming the next Juul — a wildly-successful, VC-backed consumer tech startup felled by targeted government intervention.

How would a carve-out work? This is the $75 billion question. Two sources tell me talks are more embryonic than preliminary, although they acknowledge that political threats could serve as accelerant.

  • For starters, it's unclear that carving out TikTok would make D.C. stand down. Particularly given that many of the U.S. firms reportedly involved, such as Sequoia Capital, have major China operations. Worries about code and conspiracy can't necessarily be solved via cap table.
  • Second, financing the deal could prove challenging. A total buyout would certainly cost double-digit billions, which is daunting for even the deepest-pocketed U.S. venture capitalists.
  • Private equity could get involved (KKR is among ByteDance's backers), but new investors would almost certainly need to be tapped (hi Silver Lake, we see you there). All without any guarantee of CFIUS approval or that the deal would solve TikTok's India and U.S. problems.

The bottom line: Buying TikTok sounds like an elegant solution, but may prove just as thorny as the problem itself.

Go deeper ... Exclusive: Under fire from Washington, TikTok pledges U.S. job growth

Transcripts show George Floyd told police "I can't breathe" over 20 times

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Newly released transcripts of bodycam footage from the Minneapolis Police Department show that George Floyd told officers he could not breathe more than 20 times in the moments leading up to his death.

Why it matters: Floyd's killing sparked a national wave of Black Lives Matter protests and an ongoing reckoning over systemic racism in the United States. The transcripts "offer one the most thorough and dramatic accounts" before Floyd's death, The New York Times writes.

The state of play: The transcripts were released as former officer Thomas Lane seeks to have the charges that he aided in Floyd's death thrown out in court, per the Times. He is one of four officers who have been charged.

  • The filings also include a 60-page transcript of an interview with Lane. He said he "felt maybe that something was going on" when asked if he believed that Floyd was having a medical emergency at the time.

What the transcripts say:

  • Floyd told the officers he was claustrophobic as they tried to get him into the squad car.
  • The transcripts also show Floyd saying, "Momma, I love you. Tell my kids I love them. I'm dead."
  • Former officer Derek Chauvin, who had his knee on Floyd's neck for over eight minutes, told Floyd, "Then stop talking, stop yelling, it takes a heck of a lot of oxygen to talk."

Read the transcripts via DocumentCloud.