President Donald Trump announced Saturday that he has approved the deal that will see Oracle and Walmart partner with short video sharing app, TikTok.
“I have given the deal my blessing – if they get it done that’s great, if they don’t that’s okay too. I approved the deal in concept,” he told the press.
Oracle confirmed the news, affirming that it has been chosen as TikTok’s secure cloud provider with a 12.5% stake in investment. TikTok confirmed that Oracle has become a minority investor, adding that it’s working with Walmart, who will take a 7.5% stake, in a commercial partnership.
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TikTok said that both companies will take part in a pre-IPO financing round in which they can take up to a 20% cumulative stake.
The announcement has ended the speculations that have followed TikTok’s US operations for months now. On Friday, Trump said he was not prepared to sign off on anything as the Committee on Foreign Investment in the United States (CFIU) was getting ready to send him the proposal from ByteDance. He said it must be 100% as far as national security is concerned or nothing.
Washington officials were divided regarding what should be acceptable in the deal. Treasury Secretary Steve Mnuchin thinks it’s a great deal, while Republican senator Josh Hawley said it betrays the national security objective, urging Trump to reject it.
— TikTokComms (@TikTokComms) September 19, 2020
“In any event, an ongoing ‘partnership’ that allows for anything other than the full emancipation of the TikTok software from potential Chinese Communist Party control is completely unacceptable, and flatly inconsistent with the president’s Executive Order of August 6,” he said.
Trump’s decision to approve the deal is said to have stemmed from his personal relationship with Oracle’s CEO Safra Catz, and Chairman Larry Ellison who helped raise funds for his reelection bid earlier in the year.
The deal means that TikTok’s parent company, ByteDance, will own the remaining 80%, according to a person familiar with the matter. CNBC noted that 40% of ByteDance is owned by US venture capital firms, which means the Trump administration can technically claim TikTok Global is now majority owned by US money.
TikTok said it will maintain and expand its headquarters in the US, while bringing 25,000 jobs across the country. Trump said part of the deal means the companies will be making a $5 billion generous donation into the education fund.
“We are going to be setting up a very large fund for the education of American youth and that’ll be great. That’s the contribution I’ve been asking for,” he said.
Trump’s approval of the deal has boosted Oracle’s market position, adding to its cloud management reputation. Oracle provides cloud facilities for 8×8 and Zoom, adding TikTok to the list will push it a step closer to Amazon and Microsoft that dominated the cloud market last year.
However, the deal puts Oracle up to the challenge of protecting America’s national security, and the privacy of American users of TikTok. But Catz said Oracle will ensure that users’ data is safe.
“We are a hundred percent confident in our ability to deliver a highly secure environment to TikTok and ensure data privacy to TikTok’s American users, and users throughout the world. This greatly improved security and guaranteed privacy will enable the continued rapid growth of the TikTok user community to benefit all stakeholders,” Catz said in a statement on Saturday after the deal was announced.
But, the US concern about TikTok is not completely addressed by the deal as the larger stake of the video app is still owned by ByteDance and the algorithm behind the cutting-edge technology remains with China.
Following TikTok’s struggle to stay in business in the United States, China updated its export laws, requiring some tech companies to obtain a license before it could be sold to foreign buyers. It was a move the Trump administration didn’t see coming, and it changed US’ previous dominant position over TikTok.