Tech

Trump Says U.S. Should Get Slice of TikTok Sale Price

par Featured articles licensed from The Wall Street Journal | le 4 August 2020


 

 

 

 

President says he told Microsoft’s Nadella that U.S. should get a cut ‘because we’re making it possible for this deal to happen’

By Bob Davis, Alex Leary

and Kate Davidson – The Wall Street Journal

President Trump said he was ready to approve a purchase of the U.S. operations of the Chinese video-sharing app TikTok, but only if the government receives “a lot of money” in exchange—an assertion of presidential power that appeared to lack precedent.

Microsoft Corp. MSFT 5.62% said it hopes to acquire TikTok’s business in the U.S. and three other countries. Mr. Trump said he told the company’s chief executive, Satya Nadella, that “a very substantial portion of that price is going to have to come into the Treasury of the United States because we’re making it possible for this deal to happen.”

The White House had been pushing for a sale to U.S. owners, citing national-security risks that the Chinese government could exploit the personal data the app collects.

The software giant Microsoft MSFT 5.62% sees the deal as an opportunity to absorb a new universe of users, although leveraging a youth-focused platform into a company heavily focused on serving corporate users could be difficult.

 

TikTok would bring another 100 million or so U.S. users, most of them young, and a business focused on digital advertising. Microsoft does have an existing pool of younger users through its Xbox videogame business. And, though it gets scant attention, Microsoft has a substantial advertising business, thanks to its Bing search engine.

TikTok globally isn’t profitable. Beijing-based ByteDance Ltd., TikTok’s parent, projects the app will have $1 billion in revenue this year and $6 billion next year, said a person familiar with the matter. The U.S. historically has accounted for about a tenth of TikTok users, though that group is generally considered more valuable to advertisers.

Since taking over six years ago, Mr. Nadella has paid $2.5 billion to buy the maker of the “Minecraft” videogame, about $26 billion for the professional networking site LinkedIn, and $7.5 billion for the coding-collaboration site GitHub Inc. Those deals collectively included hundreds of millions of users.

Mr. Trump indicated the deal faces a deadline of Sept. 15, after which TikTok would be banned in the U.S. Microsoft said Sunday that it would move quickly to pursue discussions with ByteDance and it aims to complete the negotiations by Sept. 15.

Legal analysts and others pointed out that the White House had been pushing for a sale of the U.S. parts of TikTok to U.S. owners, making the demand for payment all the more extraordinary.

“It is completely unorthodox for a president to propose that the U.S. take a cut of a business deal, especially a deal that he has orchestrated. The idea also is probably illegal and unethical,” said Carl Tobias, a law professor at the University of Richmond.

While the U.S. government for decades has analyzed foreign investments in the U.S. to see whether they could create national-security problems, the decisions are usually left to the members of a secretive interagency group called the Committee on Foreign Investment in the U.S.

Under Mr. Trump, the U.S. has taken a hard line on China through Cfius. Last year, for instance, Cfius ordered a Chinese company to sell gay-dating app Grindr.

Mr. Trump and his national-security team cited concerns about TikTok, raising the prospect that ByteDance could be forced to share data it collects on U.S. users with the Chinese government.

With TikTok, however, the president’s requirement for a payment showed a much greater involvement. That follows two years of personal attention to the trade battle with China, including deciding how and when to assess tariffs—and when to back off and cut a deal.

“This is an extension of Trump’s generalized view that he can micromanage the industrial sphere,” said Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics.

Mr. Hufbauer said Mr. Trump’s proposal reminded him of medieval kings who oversaw salt monopolies. “If you wanted to mine some salt, you put money into royal Treasury,” he said.

The president often presents himself as a master negotiator on everything from international trade accords to dealings with North Korean leader Kim Jong Un.

With TikTok, he likened his payment idea to “key money”—or an extra fee paid to secure a hard-to-get property. “It’s a little bit like the landlord-tenant,” the GOP president said at the White House on Monday. “Without a lease, the tenant has nothing.”

“It’s a great asset,” Mr. Trump said of TikTok. “But it’s not a great asset in the United States unless they have the approval of the United States.”

Later in the day, he was asked to clarify his remarks. “It would come from the sale,“ Mr. Trump said. “Whatever the number is, it would come from the sale. Which nobody else would be thinking about but me. But that’s the way I think. And I think it’s very fair.”

Washington’s move, in the eyes of Beijing, strong-arms one of China’s most valuable global tech companies into selling a lucrative overseas unit. Chinese officials say it is further proof that the U.S. views any Chinese tech company with international success as a challenge to its technology primacy, regardless of the product or how it runs its business.

Mr. Trump’s comments also amplify how deeply he involves himself in trade and investment decisions, which economic historians also say is a big departure from the past.

Douglas Irwin, a Dartmouth College economic historian, said early in Franklin Roosevelt’s first term, his advisers debated whether the U.S. should cut barter deals with other governments, but the president ultimately rejected the idea and negotiated trade agreements instead. No president since has looked to get so deeply entwined with commercial deals with foreign companies, he said.

The president also often made broad assertions of presidential power, which may be popular with his political base, only to back off later.

“Trump often tries to prove how strong he is by taking novel and extreme positions,” said Alex Conant, a Republican strategist in Washington. “A lot of people in Washington may roll their eyes at Trump’s off-the-wall proposals, but we shouldn’t underestimate their simplistic appeal to many voters.”

The comments, though, can make life tough for companies, which don’t want problems in Washington.

In this case, Microsoft declined to comment beyond its statement released in a blog post Sunday night. In that post, Microsoft said it is “committed to acquiring TikTok subject to a complete security review and providing proper economic benefits to the United States, including the United States Treasury.” It wasn’t clear whether Microsoft was talking about the taxes it would pay or some other arrangement.

The White House referred questions on how a payment would work to the Treasury Department. A Treasury spokeswoman referred a reporter back to the president’s comments, and declined to comment further.

TikTok says it has 100 million users in the U.S. A TikTok spokeswoman on Monday said the platform is “committed to continuing to bring joy to families and meaningful careers to those who create on our platform.…TikTok will be here for many years to come.”