TikTok on the clock

Fully Charged
Bloomberg

Hi folks, it's Shelly. TikTok skated past another U.S. ban last week as its strategy for the rest of President Donald Trump's term becomes increasingly clear: Wait it out. 

The reprieve for TikTok Chinese parent company ByteDance Ltd. followed months of drama that unfolded across Washington and Beijing and rippled through a number of America's largest companies. TikTok, one of the world's most popular apps, was nearly shut down in the process. But on Thursday, the Commerce Department officially said it wouldn't enforce an order that would have effectively banned the Chinese company from operating TikTok in the U.S. as it waited for the case to wend its way through the courts.

Separately, on Friday, TikTok got a two-week extension on a Nov. 12 deadline to sell its American business, granted by the Committee on Foreign Investment in the U.S., which examines national security threats. 

The net effect of all of this is that TikTok—and investors including Sequoia Capital, KKR & Co. and General Atlantic—have entered into a regulatory and legal gray area. The government has promised not to ban the app as long as the court cases are going on, but if Nov. 27 comes and goes and there's again no deal, ByteDance and its investors won't be in compliance with U.S. law.

This also leaves TikTok's new would-be backers—Walmart Inc. and Oracle Corp.—in the lurch. Remember, back in August Trump gave his blessing for a deal in which ByteDance would spin off its TikTok operations into a new entity called TikTok Global and sell a 20% stake to Walmart and Oracle. But that deal never closed. The company and the government couldn't really agree on whether TikTok Global would have enough American faces at the helm, and the national security panel that works through these issues never signed off on a deal. 

TikTok had said last week that the U.S. government was basically ghosting it, refusing for weeks to answer the company's questions about a possible extension despite continuing to submit court filings for the cases that were challenging Trump's executive orders. 

While we may yet see a deal finalized over the next 15 days, my bet is that TikTok's Chinese parent will continue to try to wait Trump out. As the president contests the outcome of the U.S. election, he's not focused on the short-form video app. Meanwhile, ByteDance is using arguments drawn from the U.S. Constitution to run out the clock. 

That's not to say a Joe Biden administration will give ByteDance the all-clear. The U.S. Congress and most of the American public remain staunchly anti-Beijing at the moment. But even if the new president takes a hard-on-China stance, a Biden administration could open up more options for TikTok. That will be particularly true if Biden pursues more traditional policies on U.S.-Chinese business, rather than targeting individual companies.

Until then, TikTok is better off just biding its time. Shelly Banjo 

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