Potential TikTok Ban: Could it Occur, who Stands to Gain, and who Might Secure the Platform?

Potential TikTok Ban: Could it Occur, who Stands to Gain, and who Might Secure the Platform?

The future of TikTok, the popular short-form video app, hangs in the balance in the United States. The risk of a nationwide ban has grown in recent months, fueled by national security concerns over ownership of the app.

Lawmakers are arguing for a forced sale of the platform by its parent company, ByteDance, citing concerns about user data collection and potential influence from the Chinese government.

The House recently passed legislation that would ban TikTok if the Chinese owner of the popular social media platform does not sell its stake within a year, potentially leading to significant changes in the social media landscape.

TikTok ban seems likely

According to Wedbush analysts, this “seems likely.” The company noted that the legislation and funding bill for Ukraine and Israel that passed the House includes a ban/forced sale of TikTok that is now being signed by the Senate and, ultimately, account, once President Biden signs it, would become law and start the clock on the ban/sale of TikTok.

“In essence, ByteDance would have up to a year to divest TikTok in a forced sale or face a ban as the legislation calls for today before it goes to the Senate,” Wedbush explained. “There will clearly be a myriad of legal challenges from TikTok/ByteDance once this legislation becomes U.S. law and it will become even more complicated as the next presidential election approaches.”

Additionally, Wedbush suggests that likely buyers for TikTok could be Microsoft (NASDAQ:) and Oracle (NYSE:), given their past interest and strategic fit. However, a number of private equity firms and consortiums are also expected to submit bids, with former Treasury Secretary Steven Mnuchin among those who have expressed early interest in the key asset.

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Nonetheless, Wedbush concludes that with the legislation appearing on the fast track, “it finally appears that the long-threatened TikTok ban is now here, with the clock ticking once Biden signs the bill.”

“This will have a chain impact, with the focus now shifting to the next steps in this high-stakes poker game with the sale/divestment/forced ban of TikTok now on the table,” the company concludes.

The potential impact of a TikTok ban

In his note, Wedbush highlighted the broader fear that China could retaliate, adding further pressure to the regulatory and geopolitical headwinds that U.S. companies face in the country, particularly for Apple (NASDAQ:) and Tesla (NASDAQ:) :), among others.

Meanwhile, Deutsche Bank believes the bigger question is whether or not the Chinese government is willing to agree to a forced sale of TikTok.

“Last year, the government signaled that a sale would involve an “export of technology” (specifically TikTok’s content recommendation algorithm, which was added to an export control list in 2020, when the The Trump administration was advocating a sale), which would require government approval. “, explained Deutsche Bank analysts.

Assessing the impact on TikTok’s competitors, he said he calculates that “every 10% shift in TikTok’s total U.S. engagement to its competitors generates an additional $7 value/share for Snap ( 60% upside from current levels), $19/share (4% upside) for Meta (NASDAQ:), with the impact on Alphabet (NASDAQ:) being insignificant given the lower relative margins of YouTube and the fact that the lion’s share of GOOG’s value is linked to search.



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