TikTok has formalized its U.S. operations under a new joint venture, TikTok USDS Joint Venture LLC, according to an internal memo from CEO Shou Zi Chew. This move comes as the company navigates national security concerns and potential U.S. ban. The joint venture aims to address these issues by establishing a majority American-owned and governed entity, with a defined closing date of January 22.
The directive for ByteDance, TikTok’s China-based parent company, to divest its U.S. operations stems from a national security law that was upheld by the Supreme Court in January. This situation has been a complex interplay of regulatory pressure and executive action, notably including an executive order from President Donald Trump in September that greenlit a proposed deal to ensure TikTok’s continued presence in the United States. This order was designed to facilitate the divestiture, aligning with requirements of a law originally enacted under former President Joe Biden.
Key to the new structure is a significant shift in ownership and governance. The TikTok joint venture will be majority owned by American investors. A new seven-member board of directors, with a majority of American members, will oversee its operations. The ownership breakdown indicates a deliberate effort to appease national security concerns: 50% will be held by a consortium of new investors, including Oracle, Silver Lake, and MGX, each taking a 15% stake. Affiliates of existing ByteDance investors will hold just over 30%, with ByteDance retaining a 19.9% stake.
The responsibilities of TikTok USDS Joint Venture LLC are extensive, focusing on safeguarding U.S. data, securing the proprietary content recommendation algorithm, managing content moderation, and ensuring “software assurance.” The joint venture will possess the exclusive authority to provide assurances regarding the security of content, software, and data pertaining to American users.
Oracle is set to play a pivotal role, not only as an investor but also as the “trusted security partner.” In this capacity, Oracle will be responsible for auditing and validating the joint venture’s adherence to the agreed-upon National Security Terms. Critically, sensitive U.S. user data will be housed within Oracle’s U.S.-based cloud computing data centers. This strategic partnership with Oracle appears to have resonated with the market, as Oracle’s shares saw a 5% increase in after-hours trading on Thursday.
A core task for the new TikTok entity will be the retraining of its content recommendation algorithm. This retraining process will utilize U.S. user data, with the explicit goal of ensuring that the content feed remains free from external manipulation.
While the U.S. joint venture will manage these critical U.S.-centric operations, TikTok’s global entities will continue to handle global product interoperability and certain commercial functions, including e-commerce, advertising, and marketing.
The executive order signed by President Trump in September imposed a 120-day moratorium on the enforcement of the national security law, a provision designed to allow ample time for the contemplated divestiture to be completed by January 23. The administration, at the time, highlighted the agreement from Chinese President Xi Jinping to proceed with the proposal, though Vice President JD Vance acknowledged that the Chinese government had initially shown “some resistance” to the deal, which reportedly valued TikTok’s U.S. business at $14 billion.
ByteDance had previously stated its intention to “work in accordance with applicable laws to ensure TikTok remains available to American users through TikTok U.S.” The company had also expressed gratitude to Presidents Xi Jinping and Donald Trump for their roles in facilitating TikTok’s continued operation in the United States.
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