Biden signs bill, where does TikTok go?

Biden faced the camera, dressed in khaki casual pants and a quarter-zip top, in a casual outfit. He happily answered a series of questions about the Super Bowl game that day: "Chiefs or 49ers? Jason Kelce or Travis Kelce?" When asked "Trump or Biden?" he jokingly replied, "Are you kidding me? Of course, it's Biden."

This short video marked Biden's first appearance on TikTok for his re-election campaign. On February 11, Biden officially joined the social platform TikTok and interacted with the public in a fast-paced Q&A format through several lively 30-second videos. On the first day of Biden's first short video going live, it received about 6 million views. By April, the video had been viewed over 10.5 million times.

However, just over two months after Biden enthusiastically embraced TikTok, on April 24, local time in the United States, he swiftly signed the TikTok "sell or ban" bill.

After passing through the House of Representatives and the Senate, the bill has now reached its final stage. Biden's signature means that TikTok is ultimately pushed into the most difficult moment - after the bill takes effect, it must find a way to separate from its parent company ByteDance within 270 days, otherwise it will be completely banned.

After Biden's signing, TikTok stated that it would challenge the ban in court. In a statement, it firmly pointed out, "This ban will destroy 7 million businesses and silence 170 million Americans. As we continue to challenge this unconstitutional ban, we will continue to invest and innovate to ensure that TikTok remains a safe space for Americans from all walks of life to share their experiences, find joy, and be inspired."

TikTok CEO Zhang Yiming also released a video, stating that this is a "disappointing moment" and reiterating that the company will fight through legal means. "We are not going anywhere. The facts and the constitution are on our side, and we look forward to winning again."

01 Where will TikTok go?

With Biden's signature, the future path of TikTok is full of uncertainties.

Although there is still a glimmer of hope, once this legislation takes effect, the severity of the sanctions, the difficulty of overturning them, and the length of time will all be unprecedented.

The whole event began in early March of this year. At that time, a special committee of the U.S. House of Representatives, the U.S.-China Strategic Competition Committee, put forward a bill called the "Protecting Americans from the Threat of Foreign Applications Act." The bill, based on TikTok posing a potential threat to U.S. national security, requires the company to separate from its parent company ByteDance within 165 days, otherwise it will be completely removed from U.S. app stores.

Within just 8 days, the bill was unanimously passed in the committee and then passed in the House of Representatives with a significant advantage of 352 to 65.

Over a month later, on April 20, the House of Representatives updated the bill, incorporating the "sell or ban" bill into a broader foreign aid proposal, and extending the deadline for ByteDance to sell TikTok from the original 165 days to 270 days.

By the evening of April 23, the U.S. Senate also passed the bill and submitted it to President Biden.

Finally, Biden signed the bill on the 24th, setting the final deadline for the sale of TikTok to January 2025.

Of course, there is still a possibility for a turnaround. If Biden determines that progress has been made in the sale, he can exercise a 90-day extension power, extending the deadline for the sale of TikTok to April 2025.

The only certainty in this storm is that TikTok will continue to operate in the United States until all the dust settles.

02 The difficult problem of selling TikTok: pricing, buyers, and algorithm trading disputes

If the bill is ultimately implemented, TikTok will have two options: sell or be banned.

If it chooses to sell, the difficulty of separating TikTok is not low, as it also involves the transfer of algorithms and technology.

In theory, this will start a 270-day period for TikTok to find a buyer. However, behind this potential transaction are layers of thorny problems.

First is the pricing and valuation of TikTok. As a private company, TikTok does not disclose financial details, but according to the Financial Times, ByteDance's revenue in the United States reached $16-20 billion in 2023, accounting for 16% of ByteDance's total revenue. "In a normal market, it is not difficult to obtain a valuation of $100 billion. But in the current policy risk and lack of market liquidity, if the transaction really happens, the valuation will be affected to a certain extent," said a person in charge of an investment institution.

According to the financial institution Wedbush Securities, the selling price of TikTok may be between $40 billion and $100 billion.

However, regardless of the price, TikTok has 170 million users in the United States. Even if it only sells its U.S. business, the price will be very high. This is a price that only large companies can afford, and those financially strong companies, such as Microsoft, Meta, and Alphabet, may be hindered by antitrust laws.

Therefore, it is not ruled out that "unconventional buyers" may participate in the bidding, adding new uncertainties to the transaction.

Former U.S. Treasury Secretary Steven Mnuchin is one of the potential buyers. He has a strong interest in TikTok and has expressed plans to form a professional team to advance the acquisition. Mnuchin believes that TikTok is a high-quality asset, and his 17-year experience at Goldman Sachs and extensive network can provide strong support for him to raise acquisition funds.

Apart from Mnuchin, there are reports that Bobby Kotick, the former CEO of Activision Blizzard, is also seeking partners to acquire TikTok.

Compared to a single large company acquisition, this consortium form of acquisition is more likely to avoid the risk of antitrust scrutiny.

However, the complexity of this transaction goes far beyond that. Another "controversial" part is whether the transaction will include TikTok's core recommendation algorithm - its importance is equivalent to the "secret formula of Coca-Cola."

"If only the TikTok user base and content are purchased (without the algorithm), potential acquirers may seek a high discount," said several industry insiders.

But the sale of TikTok's algorithm as a key technology not only involves commercial interests, but also involves laws and regulations related to national security and technology exports. Any sale of the TikTok algorithm must strictly comply with China's technology export control policies and obtain the corresponding licenses.

For buyers, if they want to purchase a TikTok without the algorithm, they need to prepare alternative content recommendation solutions.

03 ByteDance has no intention of "selling", and the first amendment amendment may be the last fortress

In comparison, a ban may be a lesser of two evils.

If TikTok directly transfers its U.S. business to a local competitor, it would mean a foregone conclusion. If it chooses to temporarily withdraw and wait for the wind to change and the "ban" to dissipate, TikTok may still have the possibility of making a comeback and returning to the U.S. market. Of course, this is just an idealized aspiration.

However, TikTok is likely to choose a third path of resistance: to launch an offensive and defensive battle on the legal battlefield.

TikTok and many civil society groups have questioned the constitutionality of the bill, arguing that it infringes on TikTok users' "First Amendment rights" to access lawful information.

TikTok's position can be seen from its previous responses, as it will vigorously fight against the separation bill in court. Michael Beckerman, TikTok's head of public policy for the Americas, once told TikTok U.S. employees in a memo that if the separation bill is signed into law, the company will fight back in court.

"Our struggle is far from over, this is just the beginning," said Michael Beckerman. TikTok CEO Zhang Yiming also emphasized in a previous video speech, "We will spare no effort, including using legal weapons, to protect this platform that we have jointly built."

Nadine Farid Johnson, policy director of the Knight First Amendment Institute at Columbia University, expressed a similar view: "According to long-standing Supreme Court precedents, Americans' First Amendment rights to access diverse information, ideas, and media from abroad are protected."

Some experts in the field of the First Amendment also believe that the forced sale of TikTok may infringe on users' freedom of speech, as the new owner may change the app's content policies and reshape the content that users can freely share on the platform.

There have been similar cases in history, and TikTok has successfully thwarted national-level attacks through legal means. In 2023, a federal judge in Montana rejected the state's ban on TikTok. The judge wrote in the ruling, "The ban 'exceeded state authority' and infringed on users' 'constitutional rights'."

Now, the new hope is that the court's questioning may lead to a further extension of the deadline for the implementation of the bill. But the next question is: Will the U.S. courts grant this case? And will they give the green light to the case?