Oracle, Silver Lake & MGX to Back TikTok U.S., Sources Say

Oracle, Silver Lake, and Abu Dhabi’s MGX are poised to become key investors in TikTok’s U.S. operations, sources familiar with the matter revealed to CNBC. The consortium is expected to collectively hold approximately 45% of TikTok USA.

According to sources, ByteDance, TikTok’s parent company based in China, will retain a 19.9% stake. The remaining 35% will be distributed among existing ByteDance investors and potentially new shareholders. Specific details around the arrangements for that 35% stake remained fluid at the time of reporting, according to sources.

The proposed deal, designed to address U.S. national security concerns, received backing via executive order. This followed a federal law mandate that compelled ByteDance to divest its U.S. TikTok assets or face a potential ban in the country. Lawmakers from both sides of the aisle have previously voiced concerns about the popular app’s data security and its sophisticated content algorithm.

An executive order issued previously had extended the deadline for the divestiture until December 16th, indicating ongoing negotiations and complexities surrounding the deal’s structure.

The intervention to maintain TikTok’s U.S. presence arrived after some US politicians voiced support. Republican mega-donor Jeff Yass, through Susquehanna, is a significant ByteDance investor and also holds a stake in Truth Social.

Alongside General Atlantic and Sequoia, Susquehanna, current backers of ByteDance, are anticipated to inject equity into the newly formed TikTok USA entity, sources indicated. From a capital perspective, this is indicative of a structured approach to maintaining investor confidence and ensuring financial stability during the transition. It will be interesting to see the metrics to be used for the valuation of TikTok U.S.

Significantly, the arrangement does not involve the U.S. government acquiring an equity stake or a “golden share” in TikTok’s U.S. business. Instead, the new venture will be governed by a board comprised predominantly of American members. Oracle is slated to oversee the app’s security protocols. This arrangement underscores the emphasis on data security and compliance with U.S. regulations, aiming to alleviate concerns regarding potential data breaches or censorship.

Previously, figures such as Rupert Murdoch and his son Lachlan Murdoch were speculated to have some involvement in the TikTok deal alongside Oracle’s Executive Chairman Larry Ellison, but these assertions have not been independently confirmed.