Big Appeal, and Big Question Marks, in Possible TikTok Sale

TikTok is one of the most popular and largest social media apps around the globe — with great brand recognition and loyal users.

It may also be one of the hardest to sell.

That’s the conundrum facing TikTok as Washington lawmakers push a bill that would force the app’s Chinese parent company, ByteDance, to sell it or face having it banned in the United States. The bill passed the House on Wednesday but could face an uphill climb in the Senate.

Rumors are already swirling on Wall Street about who could be interested in buying TikTok. The rumblings grew louder on Thursday after Steven Mnuchin, a former Treasury secretary, told CNBC that he was “trying to put together a group to buy TikTok, because they should be owned by U.S. businesses.” Mr. Mnuchin said he had spoken to a “combination of U.S. investors” about such a deal.

But any potential buyer could confront several roadblocks. The Chinese government could block the sale. The U.S. president, according to the bill passed by the House, would have to affirm that a deal cut the app off from ByteDance.

And then there is the price tag — almost certainly a large one. The research firm CB Insights recently estimated that ByteDance was worth $225 billion, though it is less clear how much the U.S. version of TikTok would cost on its own.

The price would limit the pool of potential buyers to a coalition of private equity firms; a corporate behemoth, like Microsoft; or a combination of the two. But it is unclear if antitrust regulators would allow a large company like Microsoft — or Alphabet, which owns YouTube — to buy the app.

A spokesman for the Federal Trade Commission declined to comment. The Justice Department declined to comment.

The last time TikTok was for sale, ByteDance spoke to Microsoft about a potential deal before selecting Oracle, the cloud computing company. Oracle brought in Walmart as a partner, but just as the two appeared poised to buy a stake in the app, the deal collapsed amid geopolitical pressure.

Oracle did not respond to a request for comment. Microsoft, which also considered buying the app in 2020, declined to comment.

TikTok has said the legislation is unnecessary because the app does not pose a risk to Americans’ data and does not skew its feed at to the whims of the Chinese government. It has proposed a plan that would store U.S. user data on domestic servers controlled by Oracle.

Beijing could apply additional government scrutiny. This week, Wang Wenbin, a spokesman for China’s foreign ministry, condemned U.S. lawmakers’ push to force a sale or ban of TikTok, though he stopped short of saying the country would outright prevent such a move.

Analysts are skeptical that the Chinese government would allow such a move to happen.

“You’re telling me China’s going to sell this amazing company to a U.S. company, just so they can take the profitability benefit and give up all of the geopolitical benefits of it being banned?” said Rich Greenfield, an analyst at LightShed Partners.

It is unclear how advanced Mr. Mnuchin’s discussions with investors are, and whether the participants have taken the formal steps necessary to pursue a possible transaction, like hiring a financial adviser or making a formal approach to ByteDance. A spokesman for Mr. Mnuchin did not respond to a request for comment.

Mr. Mnuchin has a long history with TikTok. As Treasury secretary from February 2017 to January 2021, he led the Committee on Foreign Investment in the United States, a group of federal agencies that vets international involvement in American companies. CFIUS was behind the government’s push to get ByteDance to sell its TikTok business in 2020.

Mr. Mnuchin, a former Goldman Sachs partner, now runs a private equity firm, Liberty Strategic Capital. It is one of many private equity firms facing a downturn in deals, amid rising regulatory pressure and rising interest rates. The firm recently put up $450 million to buy the beleaguered New York Community Bank.

For TikTok’s U.S. investors, which include the Susquehanna Investment Group and General Atlantic, a sale would almost certainly be preferable to a ban. These investors could opt to roll their stake in ByteDance over to any new owner. General Atlantic declined to comment, and a representative for Susquehanna did not respond to a request for comment.

“I have to think that most of the private investors in TikTok, who include a number of Americans, would want to see a divestment rather than a ban, because a ban is going to destroy a lot of value given the size and value of TikTok’s U.S. user base,” said Peter Harrell, a former national security official in the Biden administration.