TikTok Says Its Reached a US-Majority Ownership Deal

0:00Hello, I'm Stephen Carroll. I'm in Brussels where many of Europe's biggest decisions get made. And I'm Caroline Hepker in London with the hosts of the Bloomberg Daybreak Europe podcast. We're up early every weekday keeping an eye on what's happening across Europe and around the world. We do it early so the news is fresh, not recycled and so you know what actually matters as the day gets going. From Brussels, I'm following the politics, policy and the people shaping the European Union right now. And from London, I'm looking at what all that means for markets, money and the wider economy. We've got reporters across Europe and around the globe feeding in as stories break So whether it's geopolitics, energy, tech or markets, you're hearing it while it happens It's smart, calm and to the point And it fits into your morning You can find new episodes of the Bloomberg Daybreak Europe podcast by 7am in Dublin or 8am in Brussels, Berlin and Paris On Apple, Spotify, YouTube or wherever you get your podcasts

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1:11Bloomberg Tech is live from coast to coast with Caroline Hyde in New York and Ed Ludlow in San Francisco. This is Bloomberg Tech coming up. The wait. Is it over? TikTok says it signed agreements for the new U.S. joint venture. Plus, who better to talk about the new TikTok era than former CEO Kevin Mayer? He joins us at the top of the hour. And the latest reports on OpenAI's potential valuation, The Wall Street Journal giving it an$830 billion price tag. But first, we go to our top story. The details. Are they there for a proposed TikTok deal? Remarks Kurt Wagner, who covers social media, can talk us through the intricacies because we understand that still ByteDance will be playing a role, but a less than 20 % role.

1:59That's right. So ByteDance will have an ownership stake in this in this new U.S. entity. We've previously reported as well that, you know, ByteDance will be licensing its content algorithm to this new U.S. TikTok, that they would then use that license algorithm to build a new one based on U.S. user data. But, you know, the law, Caroline, is pretty clear, which is that ByteDance is not supposed to have any operational role in this new U.S. TikTok. And so this has sort of been the complaint all along is that is ByteDance's involvement, even if it's a small ownership stake or as a licensing partner on the algorithm, is that considered too much?

2:37I don't know if anyone is actually going to push back and try and fight this. No one has to date. But those who are following the letter of the law do have questions about whether this actually follows the letter of the law. And also the players involved, Kurt. Oracle, which seems to be everywhere at the moment, is playing an outsized role with a 15 percent holding. But there are other private equity involvement. There's Middle Eastern involvement. There is. And Oracle gets all the headlines because, you know, it's the large American tech company. It's also going to have an outsized role in terms of sort of securing that U.S.

3:10data. You may recall that there was a similar arrangement agreed upon a few years ago called Project Texas that was supposed to have Oracle at the center of protecting this. What's interesting about that is that at that time, the arrangement with Oracle was not considered to be a solution. Regulators in the U.S. did not feel that it went far enough to actually protect U.S. data. Now they're sort of pitching the same framework as they did a few years ago. And again, the question is, is anybody going to step up and actually push back on this? But as you mentioned, there's several different parties involved.

3:41Everyone is even Oracle owns only 15 percent of this. So there will be a lot of sort of hands in the pot here. Bloomberg's catwalk now. We thank you. Extraordinary story, a developing story. Let's talk about what we can expect from a U.S. majority owned TikTok. None other than Kevin Mayer. He is co-CEO of Candle Media. You also were the former TikTok CEO. You're the COO of ByteDance as well. And it blows my mind to think that it was August 2020 when you resigned because you couldn't see a path forward of managing TikTok globally. Five years later, here we are, Kevin. What do you make of this potential deal?

4:16Well, here we are. Thanks for having me. I really appreciate it. Look, I think Kurt did a good job of describing the deal. I think it works operationally. I think having a company like Oracle, a very trusted company run by Larry Ellison, who's a trustworthy figure, obviously, being in the center in charge of looking after and securing that U.S. data, that's crucial. And I think they're licensing the algorithm from China. So ByteDance will still own the code. But I do think this license will take another instance of the algorithm, all the code, put on Oracle servers, and then trained on the U.S.

4:52data that Oracle alone has access to. So I think it's going to end up having a vastly different feed and sort of content algorithm than you'll see around the world. So I think that that will work. And I think that ByteDance is now below 20 % ownership, 19.9 % ownership. That's a substantial difference from status quo. And I do think that ByteDance has an operational role, commercializing TikTok, selling ads, making sure e-commerce works and all the other commercialization factors. but really it will be run by a U.S. board and it'll be a separate U.S. company. It works. It works, but the proof is in the pudding as to whether the algorithm is as powerful.

5:31How do you see, as someone who's in charge of content development and wanting to get your content out there in a marketing capacity, do you have confidence that it will be as good without ByteDarts as heavily involved? Well, I think it probably will be. There's a lot of intricacies and a lot of AI, I mean, that's the word of the day in that code. And I think that code base being kept intact is crucial. I think had they tried to recreate a new algorithm from scratch because of security concerns, that would have been exceedingly difficult. That has taken years and years and thousands of engineers in China to develop this very sophisticated AI recommendation engine.

6:08So the fact that they'll have access to that, it will remain interoperable with all the other TikTok instances around the world. I think that matters quite a bit. And I think just retraining that same code base, that same algorithm with U.S. data should provide a very robust solution. I think it will be seamless. Really interesting, that interoperability, because as someone who can see the power of TikTok, because you are able to get global content, not just U.S.-focused content, is that really going to work? Is that something that you think will still remain a global business, even though you're having this U.S.

6:39part hived off? It has to. It has to remain global. I think a social media platformer, and I would call TikTok more social entertainment, actually, than social media, that has to be global. If it were to be siphoned off and cordoned off from the rest of the world and having a U.S.-only presence, I think that would be a big detriment to U.S. users. As I understand it, that's not the case. It is interoperable. And I think from a user perspective, be seamlessly accessing content from around the world and vice versa. It's the recommendation that will be U.S.-based only. like that. I mean, you just think about the entertainment element.

7:13I mean, TikTok had its first red carpet moment yesterday doing awards. I mean, this really is trying to be a juggernaut of the way you and I consume our content going forward. Just from the national security perspective, how do you think that has been silenced in terms of criticism? Because many fail that perhaps ByteDance still has a bit too much involvement, particularly if it gets some profits as well. Well, I think ByteDance deriving profits, they do that. I mean, they built this entire ecosystem, this entire code base, the technology, the app. They paid a lot of money in marketing to get that app downloaded on hundreds of millions, billions, frankly, of devices around the world.

7:49They've earned that right to have a participation in profits. And I think it's structured in such a way that's very fair. And I do think that from a national security perspective, again, having that data walled off, making sure that our potential adversaries outside of the U.S. cannot access the algorithm again, how that algorithm recommends content, content moderation policies and the actual data underneath it that drives the training of that algorithm. The fact that that is controlled by Oracle. It is like Project Texas, but I think Project Texas would have worked as well. So I think this is going to solve whatever legitimate national security concerns there were now solved.

8:26The consumer has kind of cared less and less since the first ruling, since that first under the Biden administration desire to block TikTok or at least separating them from ByteDance. Initially, people were really worried about the national security element, and now it seems that has faded. Do you think consumers are going to be interested in what they're now presented in terms of the algorithm? It's so interesting. I now get a STEM element in TikTok. They've already tried to confront that feeling that we're being dumbed down versus perhaps what they're being served by the competition in China.

9:01Yeah, look, I think it's all just pretty good news. I think that Americans will be well served by having another voice, another platform. I think Americans speaking to Americans on this platform and Americans speaking to the world and the world back to us is healthy. It's a healthy dialogue to have. I think that if it's done in a way that is protecting our interests, that's protecting our security, I think that's very good news for consumers here. And I think they'll be well served. So I think it's correct that consumers should have now put this in the back of their mind a little bit. This seems like a permanent solution.

9:34The only element of doubt here and risk is that China hasn't come out and explicitly the Chinese government hasn't blessed the deal yet. I'd be a little concerned about that. You know, back five years ago, we almost had to deal with Oracle, you may recall, and the Chinese government put an end to it. It looks like, by all accounts, in the Chinese media. The right words are being said today and then in the last few days about the deal. Looks good. Looks like China will approve it. Last little fly in the ointment. But again, wouldn't be too concerned about it. Looks like it's going to happen. You're at the very cutting edge of where media is moving to.

10:09You're sort of the lead architect behind Disney Plus and how it was unveiled. You're now thinking about new areas of brands and you're helping Coco Melling get everywhere and a Cameo for kids, for example. What is TikTok in terms of its competition? Because we're also considering a totally different media landscape. We're thinking about whether a Netflix owning a Warner Brothers would be, the real competition is YouTube, is the real competition TikTok? How do you see this evolution right now? Well, there's a lot going on in the media business now. It looks a lot different than it did even five years ago.

10:43There's young people and even people, my age and across the demographic spectrum, people are watching more short form entertainment. That's something that TikTok actually, well, in the beginning, YouTube pioneered short form entertainment. It became a full screen vertical with vertical phones when TikTok came along. And now YouTube is doing that with shorts. I think there is a sea change in how people consume content, where the influence comes from. I mean, if you look at today the landscape and what's more central to the culture, is it Hollywood, is it TikTok, is it YouTube? The answer is it's a mix of all of the above.

11:20And as usage patterns continue to evolve, I think there's going to be some challenges for Hollywood to catch up. My company, Candle Media, we own a company called Moonbug, and you mentioned Cocomelon. Cocomelon is centered on IP derived from YouTube. It's on the YouTube ecosystem. We're on shorts. We're on the traditional YouTube video. and we have over 200 million subscribers to that one English language channel and we've been the biggest show on Netflix. So I think there is taking advantage of all the different platforms that people interact with, you know, streaming, page streaming services, advertising supported streaming services, theatrical windows, we're having a Cocomelon movie come out in 2027 and YouTube and TikTok at the center of that IP generation machine.

12:04That's the future of media and media companies that are really at the cutting edge are really looking YouTube, TikTok, short-form video alongside the long-form traditional storytelling that has been their bread and butter for decades. Do you have any anxiety for Hollywood, for IP, for content creation, if indeed Netflix does take ownership of Warner Brothers Discovery, if Paramount does for that example, and indeed what it means for your old alma mater, which is Disney? Well, Disney's in a great position. Disney has the IP, the franchises, they have the brands that matter. Disney, Star Wars, Marvel, Pixar.

12:40Disney's in a pretty unassailable position. Put them aside for a second. What Hollywood needs is a healthy ecosystem. They need studios that have enough revenue to cover their costs, that are profitable, and that are in a position to compete against these behemoths like TikTok, like YouTube and Google. So a combination there between Warner Brothers and one of Netflix or Paramount is crucial, I think, to maintain the health and the profitability of that ecosystem. It's better to have fewer competitors that are more financially viable and can buy more product and support a high production value than having more buyers, one more buyer being Warner Brothers independently in a weaker financial position.

13:22So I think that a combination is good. And even though Netflix won the first round, don't count it out. The Ellisons, they're incredibly smart and aggressive. Don't count out Jerry Cardinal, Redbird. These guys are very serious. I think they're going to come back with a higher bid. And when they approach, and remember shareholders still haven't spoken yet, I think the likelihood of here is that Warner Brothers ends up with Paramount. And I think it's ultimately, it's the cost of jobs, obviously, in Hollywood. There's no getting around that, but ultimately good for creators. I think we might have to have you back very soon as all of these stories unfold.

13:57Kevin Mayer, what a joy to have you on, Candle Media, co-CEO and former TikTok CEO and COO of ByteDance. Now, let's get back to these markets that are in risk on mode as we head towards the very shortened week next week ahead of the holidays. And Asdaq is up 1.2 percent. In fact, stocks are rising even as traders face the expiration of a record pile of options today. We're seeing Bitcoin up 3.3 percent, but we're also looking at key names such as Oracle. We're up 7 percent as that TikTok deal. Is it near closing? What does it mean for Oracle's business model as its cloud partner? This is Bloomberg Tech.

14:43Take a look at Oracle shares. They're doing strongly today and everywhere you turn this week, Oracle has dominated the headlines. From anxiety around data center timetables, data center leases, along with mounting debt piles, ability to raise financing for the Michigan project, not to mention Larry Ellison's other potential bets on Warner Brothers Discovery and now TikTok, How is Oracle benefiting from this sale? How is it affording all of it? Let's go to Manip Singh briefly. He's Global Head of Tech Research, Blueberg Intelligence. So why is the TikTok deal good? Why is all of this good for Oracle or not?

15:16Well, right now, I think the concerns around Oracle stem from the fact that they can't finance that infrastructure build-out. But I think the TikTok news and just this Michigan sort of build-out happening is another sign that, you know, things are moving incrementally. And they have given a revenue guidance for the next four years. Even if you don't believe their RPO number, you have, you know, intermediate bogeys, $32 billion in IAS revenue for next year, you know,$73 billion the year after. And for that, they have to build out infrastructure. Without that, that revenue won't going to come to fruition.

15:54So from that perspective, you know, these incremental steps are positive. And, you know, if the fact that they can build out a data center in Michigan, to my mind, is another step towards, you know, realizing that$32 billion in revenue next year. I hope you're around next week because I have a feeling Oracle will also be on our minds then, Mandeep Singh and Bloomberg Intelligence. Thanks so much for all of your coverage this week and your analysis. Let's get more on the market's moves today. Stephanie Aliaga is with us, global market strategist at J.P. Morgan. So we end the week on a high, But wow, have we been riddled with AI doubts.

16:28Where has your mind been at? Yeah, it has been a really interesting tape in recent weeks and months. I mean, the debate around AI, the return on investment around AI, around the quality of the balance sheets, the war on the model front, right, between ChatGBT and Google's Gemini. And I think moving forward, markets are realizing this is going to be less of a competition on just the innovation, although the innovation is really important, but also on balance sheets. And the show me the money, this kind of desire for markets to really see companies with AI-tied cash generation, which is a tricky environment to be in because if you want to see growth from AI but cash, you might need to actually let go of some cash in the near term to invest in some of these infrastructure build-outs to ultimately get the growth that we're looking for.

17:21I mean, investors being asked to be patient. The word I've heard time and time again this week is discerning. Is that what you feel people are starting? It's not all boats are rising. We're picking our winners already. Exactly. We had three years of AI providing this really powerful tide, lifting a lot of boats. And this year, we've seen a lot more discernment amongst these names. We think that that can continue. Now, it doesn't mean that AI isn't still this kind of rising tide, but we're now seeing the different markets here. The markets around models, the markets around cloud services, the markets around infrastructure.

17:53And now we want to see who are going to be the leaders, who are going to be the companies that actually capture the best economics in each of these markets. So it's not necessarily zero sum, but now competition is really ratcheting higher. And balance sheets are starting to fray a little bit, right? We're tapping into debt markets, so companies are also seeing greater differentiation amongst themselves that way. You are a cross-out perspective. Should people be owning the debt of these big companies, corporate bonds, as well as equity exposure? I mean, I guess it depends on what you're looking for.

18:26You know, I think the Fed is lowering interest rates. And, you know, if you see interest rates move lower more broadly, like there is going to be demand for this debt issuance. And we're expecting a lot of that. There's also$500 billion in dry powder and private credit, right? So I don't doubt that this capital will find, you know, at home. But I think the question for investors is to just make sure that you have some diversification to this theme in your portfolio. Because as extraordinary and transformative as AI is going to be, the last few weeks have reminded us that it's going to be choppy along the way.

18:58There can be surprises and unknowns. So you want to make sure your portfolio is built to withstand those choppier waters while still benefiting from the secular opportunity that remains. What almost has been the theme of 2025 is how dominant the private sector or private sector names have been on your maybe overexposure in your public portfolio. I think of a name like OpenAI. We think of SpaceX and its valuation, OpenAI potentially being$830 billion just to pip the post on SpaceX's$800 billion valuation. How much are you seeing your clients wanting more exposure to the private markets? And how is that going to translate to public in 2026?

19:35It's so key. And it's such a big difference from what we saw in the internet era, right? when all of these internet startups were just going public on day one. And today you have these AI native companies reaching scale that we've never seen before in private markets. And of course there are the big model developers. But what's been actually most interesting for me has been seeing the explosion in AI applications. If you think about who are the companies that are really at the center of end user demand, selling to consumers, selling to businesses, is it's these more niche AI applications, and they are growing at scales that we've never seen before, right?

20:13The average AI startup reaching$100 million in under 12 months, on average, that's taking startups about roughly 10 years to achieve. You had Patrick McGoldrick here yesterday from our firm talking about this dynamic. So absolutely, like, if you want some of that growth exposure, you're going to need to look in private markets. In our long-term capital market assumptions, we actually see that the long-term return expectation in private equity at 10.2 versus large cap public equities in the US, 6.7. A big reason for that is starting valuations in public equity markets. In private markets, you have that issue too.

20:48So selectivity is going to be really, really important, but we still think there's a lot of opportunity. What about opportunities for IPOs next year and those who haven't got the private exposure getting it when it goes public? Yeah, that's going to be really interesting because some of these companies like OpenAI and SpaceX, at their private market valuation, they would already be top 15 companies in the S &P 500. So they're not even public yet. And when they do go public, investors, you know, we're going to see what the demand is at that time. But you're going to be getting into a company that already looks kind of like a mega cap, you know, and I think these companies are then going to have to stand against public market scrutiny, like the scoreboard that these companies actually have to really attest to.

21:28So it'll be really interesting. I think if we get these IPOs next year, it'll be a really powerful, really like referendum on the AI ecosystem, which is an opportunity and a risk for the broader space next year. Regulators, we understand, in China have yet to say whether they'll approve the proposed sale and new structure for ByteDance-owned TikTok, a decision required for the deal to move forward. Now, the fate of TikTok has become a key issue in the U.S.-China relations under the Trump administration. Bloomberg's technology editor in Washington, Michael Shepard, you're joining us. You can help remind us actually what isn't agreed to yet because the market is pricing in a deal with new U.S.

22:04ownership and control and less than 20 percent held by ByteDance of U.S. TikTok. But what haven't we heard yet? Well, the loose end really, as you said, Carol, is Chinese government approval. And we may never really hear a full-throated blessing from Beijing for this transaction in the way we might ordinarily expect. We have heard from the White House very clearly. We all remember September 25th, President Donald Trump very publicly signed the declaration, the order, setting in motion the deal that was actually inked yesterday and announced in an internal memo to TikTok employees by company CEO Xiao Chu.

22:43Now, the interesting thing, Carol, when you think about it, is that these are serious players. When you think about Oracle, when you think about Xiao Chu, when you think about Silver Lake and MGX, the other three main new investors here, preparing to take a significant chunk together, they would control about 45 % of the new U.S. entity, they would not likely proceed unless they had a very good sense that China was willing to go along. Putting that pen to paper is a significant step forward than actually just talking about it, which is the stage we were at when we last heard back in September with Trump signing.

23:19Mike, remind us, though, what else is really at stake here between U.S. and China. NVIDIA is involved. We think about the chip war, the tech war more broadly. But also this week has been particularly concerning considering what's happening in terms of arms deals with Taiwan. Can you just remind us really where the relationship lies at this moment? Well, there are all sorts of cross-currents happening here right now. You brought up the Taiwan sale. And of course, that envelops an industry that we cover so closely, chips, given that so many, the lion's share of the advanced AI chips are actually produced on the self-governing island.

23:53But the cross-currents are so many. You talked about Nvidia and the pending approval that President Donald Trump, at least verbally on his Truth Social, allowed the sales of Nvidia's H200 chips to China. Jameson Greer, the U.S. trade representative, said on Bloomberg TV this morning that he sees that as separate. He sees it as a separate issue within the China relationship. Perhaps TikTok, in a way, is too. U.S. officials have brought up export controls and TikTok in their conversations with the Chinese. But the question is, are they able to break them away from all the other questions surrounding things like rare earths and also the tariffs that the Trump administration has been threatening against Chinese goods?