Wed, 09/16/2020 – 19:10
WSJ followed up the Bloomberg reported noted earlier with a more comprehensive report of where things stand. The central conflict is that a group of China hawks are demanding that Oracle and the other US investors in the deal walk away with at least a majority combined stake, to ensure that ByteDance (and, by extension, Beijing) can’t install any “backdoors” or otherwise make the company’s data accessible to Beijing.
Reports claim that the two sides are working to hash out a deal whereby the new entity would include all of TikTok’s assets, including its “golden goose” algorithm. This would in theory make it easier for Oracle to monitor all of TikTok’s network while also handling most of its IT infrastructure. This would ideally act as a safeguard against Beijing getting its hands on the data.
Of course, one can never completely eliminate that risk.
After days earlier expressing his appreciation for Oracle’s Larry Ellison, Trump told reporters Wednesday evening that he’s not comfortable with the deal as it stands.
“Conceptually, I can tell you, I don’t like that,”” he said, adding that he had not been briefed on that element of the deal.
While the Trump Administration officials quoted anonymously in the WSJ’s report projected optimism about the deal, they ultimately offered no plan for winning the approval of Chinese regulators, which have said they would rather see TikTok shuttered than be coerced into selling.
The deadline is Sept. 20, so we have until the end of the weekend for the two sides to work out another stop-gap “deal”, only for everything to fall apart again once it’s blocked by Beijing.
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Update (1730ET): New details about the new ByteDance and Oracle-backed, US-headquartered newly independent TikTok have emerged in the latest Bloomberg report, as the administration scrambles to try and convince or mollify a group of GOP senators who remain suspect of ByteDance’s majority control of the new venture.
Over the past few hours, Sen. Ted Cruz has joined Marco Rubio, Josh Hawley and others in opposing the deal, penning his own letter claiming that any deal that doesn’t 100% address national security concerns should be rejected.
Complaints about Oracle not having access to TikTok’s core algorithm have metastasized into concerns that ByteDance will leave Oracle in the dark. However, Bloomberg is reporting that Oracle will have complete access to TikTok’s source code as part of the deal. Specifically, the report adds more context on the meaning of the phrase “trusted security partner,” one of the initial complaints from Hawley & Co. Trump added that he “doesn’t like” that Oracle won’t be outright buying the US business, something that Beijing would prohibit.
Oracle Corp. will get full access to TikTok’s source code and updates to make sure there are no back doors used by the company’s Chinese parent to access data on the video-sharing app’s 100 million American users, according to terms of a proposed deal submitted to the U.S. government over the weekend and reviewed by Bloomberg.
The new details of the deal with TikTok parent ByteDance Ltd. shed light on what the companies and security officials mean when they call Oracle a “trusted technology partner,” which goes beyond just housing data inside Oracle’s U.S. cloud servers, according to people with knowledge of the terms, who asked not to be identified because they were not authorized to speak publicly.
Oracle will be able to check all source code from the algorithms that decide which videos get shown to which users to ensure there are no back doors and will be able to continue to review the technology as updates come in to make sure there are no new points of access, the people said.
Commenting on the administration’s internal talks, CNBC’s Kayla Tausche said it’s believed that Trump and Mnuchin support the deal, while Pompeo, Barr and the GOP senators – among others, like Peter Navarro – have continued to harp on the national security issue.
President Trump said during a press briefing Wednesday evening that the deal needs to be “100%” and that there will be more information Thursday morning. Though that doesn’t necessarily rule out the possibility that CFIUS’s decision could leak tonight. Trump also said there’s no way to “guarantee” that money from TikTok will pay off the Treasury.
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Hours after former presidential candidate Marco Rubio came out against the new TikTok-Oracle deal, which would spin off TikTok into a US-headquartered independent company majority owned by ByteDance, with Oracle holding a major stake and a contract to supervise the hosting and back-end technology while ByteDance continues to manage TikTok “at arm’s length.”
Earlier, a senior reporter from Fox Business said the deal was on track to be approved by CFIUS, the Commerce Department board that reviews deals for national-security concerns. After their initial proposal faced pushback, Oracle and ByteDance worked with the administration to devise the new deal, which was unveiled on Monday. Despite some complaints about ByteDance retaining majority control, the deal appeared set to sail through.
However, Marco Rubio came out against the deal a few hours ago. Now, Bloomberg is reporting that the deal is now facing opposition from a group of GOP senators led by Rubio , a group who have presumably been lobbying CFIUS and Trump.
Per Bloomberg, several high-ranking officials, including Secretary of State Michael Pompeo, are now concerned that after a potential transaction, TikTok’s Chinese owner, ByteDance could still access user data from its 100 million or so users in the US, its sources claimed.
Oracle Corp.’s bid for TikTok falls short of resolving concerns of Trump administration officials that the Chinese-owned video-sharing app poses a risk to U.S. national security, according to people familiar with the matter. President Donald Trump has the authority to sign off on a deal, but continuing concerns from national security officials could sway his decision. The agreement remains on the table, with discussions continuing between administration officials and the companies, said the people, who asked not to be named because the talks are confidential. Addressing those remaining issues could pave the way for U.S. approval, the people said.
Many remain wary of the new ownership structure, which Rubio and Sen Josh Hawley have criticized for ceding too much control to ByteDance, Of course, anything less would likely be unpalatable for Beijing.
Treasury Secretary Mnuchin and AG Barr are also examining the deal. Both have some say in the final decision, since both of their departments are part of CFIUS. While Mnuchin has reportedly reviewed the deal, Barr hasn’t yet had the time. Officials first expressed their doubts to CFIUS Tuesday night, and the committee is expected to meet again on Wednesday.
We’re still waiting on the final word from CFIUS, but if the past is any guide, a rejection would no longer come as a surprise.
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Author: Tyler Durden