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TikTok will spin off into a separate company, partly owned by Oracle

TikTok will spin off into a separate company, partly owned by Oracle
Illustration by Alex Castro / The Verge

Oracle plans take an ownership stake in a newly formed TikTok corporation as part of the recently announced deal, the Financial Times reports. The new arrangement will not cleave off TikTok regionally, but it will create a separate corporate entity for the app, in which Oracle will take a minority stake. Oracle will also ensure that data from American users is stored and processed in the United States, per the recommendations of the Committee on Foreign Investment in the United States (CFIUS).

TikTok was already headquartered in California, with nominal independence from ByteDance’s China operation. The main change made by the deal is Oracle’s minority stake in the company, the size of which is still unclear. But while Oracle’s stake makes TikTok a more legally distinct corporation, it’s still likely that the resulting company will rely on algorithms and applications developed and deployed from China.

TikTok has committed to increasing hiring within the US, and in an interview with CNBC, Treasury Secretary Steve Mnuchin described the deal as part of a broader effort to establish TikTok as a “US-headquartered company.”

It’s also unclear whether the new agreement will result in changes to how TikTok operates, or whether it will meaningfully address the security concerns that first motivated the proposed ban. As former Facebook security chief Alex Stamos put it on Twitter, “A deal where Oracle takes over hosting without source code and significant operational changes would not address any of the legitimate concerns about TikTok.”

Announced on Sunday, the Oracle deal is part of a last-minute effort to prevent the app from being banned in the United States, as threatened by President Trump. The president has yet to formally approve the deal, and according to the Financial Times, crucial details are still being determined.

The national security limitations of the arrangement have also drawn criticism from Trump’s fellow Republicans. In an open letter on Monday, Sen. Josh Hawley (R-MO) urged Mnuchin to oppose the deal.

“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,” Hawley wrote, “and flatly inconsistent with the President’s Executive Order of August 6.”

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Oracle is set to take a minority stake in the new TikTok corporation, which will also be partly owned by the China-based ByteDance. The arrangement is part of a deal encouraged by President Trump as a way of staving off an imminent ban on TikTok.

The Verge

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