CHINESE officials are evaluating a potential option that involves Elon Musk acquiring the US operations of TikTok if the company fails to fend off a controversial ban on the short-video app, according to people familiar with the matter.
Beijing officials strongly prefer that TikTok remains under the ownership of parent ByteDance Ltd., the people say, and the company is contesting the impending ban with an appeal to the US Supreme Court.
But the justices signaled during arguments on Jan. 10 that they are likely to uphold the law. Senior Chinese officials had already begun to debate contingency plans for TikTok as part of an expansive discussion on how to work with Donald Trump’s administration, one of which involves Musk, said the people, asking not to be identified revealing confidential discussions.
A potential high-profile deal with one of Trump’s closest allies holds some appeal for the Chinese government, which is expected to have some say over whether TikTok is ultimately sold, said the people. Musk spent more than $250 million supporting Trump’s re-election, and has been tapped for a prominent role in improving government efficiency after the Republican takes office.
Under one scenario that’s been discussed by the Chinese government, Musk’s X - the former Twitter - would take control of TikTok US and run the businesses together, the people said. With more than 170 million users in the US, TikTok could bolster X’s efforts to attract advertisers. Musk also founded a separate artificial intelligence company, xAI, that could benefit from the huge amounts of data generated from TikTok.
Chinese officials have yet to reach any firm consensus about how to proceed and their deliberations are still preliminary, the people said. It’s not clear how much ByteDance knows about the Chinese government discussions or whether TikTok and Musk have been involved. It’s also unclear whether Musk, TikTok and ByteDance have held any talks about the terms of any possible deal.
Musk and his representatives did not respond to a request for comment. Musk posted in April that he thinks TikTok should remain available in the US. "In my opinion, TikTok should not be banned in the USA, even though such a ban may benefit the X platform,” he wrote on X. "Doing so would be contrary to freedom of speech and expression. It is not what America stands for.”
ByteDance and TikTok representatives didn’t respond to messages seeking comment. The Cyberspace Administration of China and China’s Ministry of Commerce, government agencies that could be involved in decisions about TikTok’s future, also didn’t respond to requests for comment.
The talks in Beijing suggest that TikTok’s fate may no longer be in ByteDance’s sole control, said the people. Chinese officials recognize they will face tough negotiations with the Trump administration over tariffs, export controls and other issues, and they see the TikTok negotiations as a potential area for reconciliation, they said.
The Chinese government holds a so-called golden share in a ByteDance affiliate that gives it influence over the company’s strategy and operations. TikTok maintains that the control only applies to the China-based subsidiary Douyin Information Service Co., and has no bearing on ByteDance operations outside China.
Still, Beijing’s export rules prevent Chinese companies from selling their software algorithms, like the one integral to TikTok. Because the Chinese government would have to approve of a sale that includes TikTok’s valuable recommendation engine, it has a significant voice in any possible deal.
TikTok’s US operations could be valued at around $40 billion to $50 billion, Bloomberg Intelligence analysts Mandeep Singh and Damian Reimertz estimated last year. That’s a substantial sum even for the world’s richest person. It’s not clear how Musk could pull off such a transaction, whether it would require the sale of other holdings, or whether the US government would approve. He paid $44 billion for Twitter in 2022, and is still paying off sizable loans.
Musk has a positive reputation among many ByteDance employees in China, according to a person familiar with the matter. He is seen as a very successful entrepreneur, who has experience engaging with the Chinese government through his Tesla Inc. business, the person added.
ByteDance’s leaders have repeatedly said their priority is to fight US legislation that requires the Beijing-based company sell or shut down the US operations because of national security concerns. TikTok’s lawyers have argued the legislation violates free speech laws under the Constitution’s First Amendment.
A majority of the Supreme Court justices suggested the security concerns take priority over free speech, although they have yet to issue a formal decision. President-elect Trump, who takes office Jan. 20, has sought to delay the TikTok ban - which takes effect Jan. 19 - so he can work on the negotiations. He has said he wants to "save” the app and there’s been speculation he could take last-minute action to sidestep the ban.
On a practical level, spinning off TikTok’s US business would be highly complex, affecting shareholders in China as well as the US. Lawyers for TikTok argued before the Supreme Court that separating the US portions of the product would be "extraordinarily difficult.”
It’s unclear if US TikTok would be sold off in a competitive process, or if a sale would be arranged by the government. Billionaire Frank McCourt and "Shark Tank” investor Kevin O’Leary are part of a bid through Project Liberty to acquire TikTok, which O’Leary has said he discussed with Trump. In the past, Microsoft Corp. had sought to acquire the business, and Oracle Corp. has a deep technology partnership with the company.
One alternative for TikTok would be to move its existing US customers over to a similar app - with different branding - to potentially sidestep the ban, one of the people said. It’s not clear how effective such a move would be.
One person close to the company, who spoke on the condition of anonymity because of the sensitivity of the strategy, said before the Supreme Court hearing that the legal battle is still the focus of top executives and they would prefer to keep fighting in the US rather than sell TikTok US and cede control for good.
Musk is in a position to influence the China-US relationship as the world’s richest person with businesses that straddle the world’s two largest economies. Tesla, where Musk is chief executive officer, erected a sprawling factory in Shanghai in 2019 and has since expanded the facility into the company’s largest production base. The effort helped Tesla expand its market share in China despite tough local competition, and build goodwill with government officials.
While Trump is staffing his incoming administration with China hawks like Secretary of State nominee Marco Rubio, Musk has spoken out against some recent China trade policies, including the Biden administration’s tariffs on Chinese electric vehicles. - Bloomberg
