As multiple stakeholders scramble to resolve national security concerns while preserving TikTok’s operations in the US, Perplexity AI has revised its merger proposal to TikTok parent ByteDance, potentially giving the U.S. government a 50 percent stake in the new company upon a future IPO.
CNBC reports that in a move to address the ongoing concerns surrounding TikTok’s operations in the United States, Perplexity AI has submitted a revised merger proposal to ByteDance, the parent company of the Chinese social media app. The new proposal, viewed by CNBC, outlines the creation of a new U.S. holding company called “NewCo,” which would combine Perplexity AI and TikTok U.S., while also allowing for the U.S. government to own up to 50 percent of the new entity upon a future IPO.
Under the revised proposal, ByteDance would contribute TikTok U.S., without its algorithm, in exchange for its existing investors receiving equity in NewCo. Perplexity AI would offer itself up in exchange for its own investors receiving a distribution of the NewCo equity. The merger would be funded by new third-party capital providers, which would be mutually agreed upon by both companies. This capital would be used to provide a one-time dividend payment to ByteDance investors in exchange for simplified governance and to support the growth of the new company.
Perplexity AI has experienced a significant increase in its valuation over the past year, starting 2024 with a valuation of approximately $500 million and ending the year at around $9 billion. This growth can be attributed to the increasing investor interest in the generative AI boom, as well as the potential for AI-assisted search to disrupt the way consumers access information online.
Perplexity AI’s merger bid with TikTok is not the only potential resolution to avoid an outright ban. One plan involves Oracle and a group of outside investors effectively taking control of the app’s global operations. Under the proposed deal, ByteDance would retain a minority stake in the company, while Oracle would oversee the app’s algorithm, data collection, and software updates. Oracle already provides the foundation for TikTok’s web infrastructure. Chinese regulators, who have historically opposed selling TikTok, recently indicated they might not obstruct an ownership change.
Microsoft is reportedly among other potential investors engaged in the discussions. A meeting between Oracle officials and the White House took place on Friday to discuss the potential deal, with another meeting scheduled for next week. According to a source, Oracle is interested in acquiring a TikTok stake “in the tens of billions,” but other aspects of the deal remain in flux.
The White House negotiators have indicated that ByteDance values TikTok’s global operations at a minimum of $200 billion, which exceeds the financial reach of the investor groups currently proposing bids. The negotiations face several other challenges as well, including appeasing Congress and addressing national security concerns. An anonymous congressional staffer involved in talks about TikTok’s future emphasized the importance of demonstrating that ByteDance would not have operational control over the app, stating, “There needs to be no backdoors where China can potentially gain access.”
One possible solution being discussed is binding legal agreements from the White House, ensuring ByteDance cannot covertly manipulate the app. However, Sarah Kreps, a technology and foreign policy expert at the Brookings Institution, said it would be difficult to prove the absence of Chinese control over data and algorithms. “You can audit millions of lines of code, but it’s really hard to show one way or the other,” she explained.
The current negotiations follow the collapse of a previous national security plan involving Oracle, known as Project Texas, which failed to guarantee TikTok’s independence from ByteDance.
Breitbart News previously reported that whistleblowers have called Project Texas “largely cosmetic,” allowing China to still control TikTok in the US:
Moreover, Evan Turner, who worked as a senior data scientist at TikTok from April to September 2022, added that the app continued working closely with ByteDance, despite claiming otherwise.
Turner cited an incident in which he says he was reassigned to a Seattle-based executive, noting that he never actually met this executive and was instead told to continue working with a ByteDance executive in China while it said he was reporting to an American executive on paper.
These moves were apparently made was in effort to appease U.S. lawmakers, who have been expressing concerns over the risks TikTok poses to American users and the United States in general.
Read more at CNBC here.
Lucas Nolan is a reporter for Breitbart News covering issues of free speech and online censorship.
