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|Day's range||50.71 - 51.79|
|52-week range||37.33 - 54.00|
|Beta (5Y monthly)||N/A|
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(Bloomberg) -- TikTok’s Chinese owner asked a federal judge to stop President Donald Trump from enforcing a ban that would remove the viral video-sharing network from U.S. app stores this weekend.ByteDance Ltd. filed on Wednesday for a temporary block on the ban even as it continues to pursue approvals from the Trump administration for a sale of its U.S. operations to Oracle Corp. and Walmart Inc. Its request deploys many of the same arguments a group of WeChat users made to win their own preliminary injunction last weekend against a similar ban.Both TikTok and WeChat, which is owned by China’s Tencent Holdings Ltd., have been labeled national security threats by the Trump administration, which is seeking to stop their use in the U.S. -- or, in TikTok’s case, force a sale to U.S. companies -- on the grounds that they could allow the Chinese government to gain access to the personal data of millions of Americans.The TikTok ban, proclaimed in an Aug. 6 executive order by the president, is part of a wider effort by the Trump administration to take a hard line against Beijing, betting that a tough approach will help win the president re-election. Secretary of State Michael Pompeo has urged U.S. companies to bar Chinese applications as part of his “Clean Network” guidance.Ticking ClockByteDance’s preliminary-injunction request challenges new Commerce Department rules that would remove TikTok from app stores and require changes to the viral network’s core functionality that the company says would effectively shut it down in the U.S. by mid-November. ByteDance asked the Washington court to set a hearing on its request before the rules take effect at 11:59 p.m. on Sept. 27 and proposed that both sides file additional briefs this week.Filing in response, the U.S. said “there is no need for the parties (or for this court) to conduct emergency proceedings and wade into sensitive issues of national security and foreign policy on the basis of a limited record prepared on an extremely short time frame.”Justice Department spokeswoman Mollie Timmons declined to comment on whether the department would challenge the injunction. The Commerce Department didn’t immediately respond to a request for comment.ByteDance argues that the TikTok ban exceeds the Trump administration’s legal authority. Its filing echoes a number of the arguments made by WeChat, which said a ban would the ban infringe on its First Amendment rights and cause irreparable harm to the company.‘Irreparable Harm’TikTok has “made extraordinary efforts to try to satisfy the government’s ever-shifting demands and purported national security concerns,” ByteDance said in its filing. “In the absence of preliminary injunctive relief, the August 6 order and the prohibitions will cause plaintiffs irreparable harm.”Trump has given his conditional blessing to the plan for Oracle and Walmart to take a stake in TikTok, but the arrangement is by no means final. The Committee on Foreign Investment in the U.S. still needs to sign off, as do officials in China, where the state-run news media have denounced the plan as “an American trap” and an “underhanded trick.”There are also significant disagreements over the specifics of the deal. ByteDance says it plans to retain 80% of TikTok Global, the new company that would result from the deal. Oracle says the company will be mostly owned by U.S. entities and that ByteDance “will have no ownership,” according to The Wall Street Journal.U.S. District Judge Carl Nichols set a hearing for 10 a.m. Thursday to discuss the scheduling dispute.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Attorney General William Barr and other U.S. national security officials haven’t signed off on plans to let Oracle Corp. and Walmart Inc. take a stake in TikTok to avert President Donald Trump’s threat to bar the social network from the U.S., according to a person familiar with the matter.The officials have unresolved concerns about the national security implications of the proposal, as competing camps emerge inside the administration, said the person, who asked not to be identified discussing internal deliberations. Treasury Secretary Steven Mnuchin has led officials supporting the plan.TikTok’s Chinese owner, ByteDance Ltd., faces a deadline this weekend to win approval for a sale of its U.S. operations or face a de facto ban in the U.S. stemming from an Aug. 6 executive order by Trump. The Justice Department didn’t immediately respond to questions about Barr’s current thinking on the TikTok deal.ByteDance has asked a federal judge for a preliminary injunction to block the order that would force TikTok off of the app stores run by Apple Inc. and Alphabet Inc.’s Google.Justice Department spokeswoman Mollie Timmons declined to comment on whether the department will challenge the injunction.The development was reported earlier by Fox Business. Over the weekend, Oracle and Walmart agreed to take 20% of a new U.S.-based entity called TikTok Global. Trump praised the TikTok agreement on Saturday, calling it “a great deal for America.”“It’ll be a brand new company, it will have nothing to do with any outside land, any outside country, it will have nothing to do with China, it’ll be totally secure, that’ll be part of the deal,” Trump said.But questions have been raised since then about most of those assumptions, with initial outlines of the deal showing ByteDance would continue to control the valuable artificial intelligence algorithms for TikTok’s popular short videos and would initially maintain majority ownership of the U.S. spinoff. Ownership percentages could change after a proposed initial public offering.National security experts have also cast doubt on the technical feasibility of Oracle being able to police TikTok’s code in real timeTrump’s order to ban TikTok followed an investigation by the Committee on Foreign Investment in the U.S., which reviews proposed acquisitions of domestic businesses by overseas investors for national security concerns. Trump’s threat set off a flurry of attempted deal-making, pushing ByteDance to seek a sale of the app’s American operations to a U.S. company.The Justice Department is one of the agencies represented on Cfius, which is led by the Treasury Department.Resistance to the TikTok deal has developed in China, where state-run media have denounced it as “an American trap” and a “dirty and underhanded trick.”(Updates with Fox Business reporting the development, in paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- President Donald Trump’s spat with China over “total control” of TikTok raises a corporate governance question: Does majority ownership actually give you control over a business empire? The Chinese, and the broader conglomerate world, may have a very different view from the administration. The first details that surfaced from TikTok’s planned deal with Oracle Corp. and Walmart Inc. would put most of the company in American hands. U.S. investors already own 40% of TikTok parent ByteDance Ltd. The current proposal would give 32% of TikTok to American investors (40% of ByteDance’s 80% stake), plus Oracle and Walmart’s 20%. This gets us to 52%.But just because you have a majority stake doesn’t mean you have control. It all depends on the corporate structure. Asia’s conglomerates routinely grip onto their empires via pyramid-shaped ownership. Often, those with the most shares are mere passive investors, enjoying economic interests only. South Korea’s chaebol take this art to perfection, using just a few billion worth of shares to control empires multitudes larger. For instance, the fund industry is the largest holding bloc of blue chip Samsung Electronics Co., and Korea’s National Pension Service is its single biggest shareholder. But the founding Lee family is firmly in the driver’s seat, mostly through the 13.5% stake held by Samsung C&T Corp. and Samsung Life Insurance Co. At about 5%, the Lee family’s direct holdings in Samsung Electronics are tiny. Or consider Korea’s third largest conglomerate, SK Holdings Co. The Chey family has about a 25% stake in the company, which owns 27% of SK Telecom Co. That business, in turn, has 20.1% interest in chipmaker SK Hynix Inc. In other words, with just $3.2 billion worth of shares, the family has the $51 billion semiconductor crown jewel at its command. This is the capital-efficient way to control empires. Founders build layers of holding companies, owning more shares than any other single entity at each level above the flagship assets. These are often too expensive to hold directly.China’s conglomerates are taking to the Korean fashion of layering, too. For instance, Tsinghua Unigroup Co., a commercial arm of the prestigious Tsinghua University and the closest thing the country has to the Samsung group, has built a labyrinth of holding companies to control cutting-edge (by Chinese standards) flash-memory chipmaker Yangtze Memory Technologies Co. In terms of money spent, the state-backed China Integrated Circuit Industry Investment Fund, known simply as the Big Fund, is by far YMTC’s largest shareholder, owning 49% via direct and indirect holdings. But since Unigroup has more than a 50% stake at each level of YMTC’s ownership tree, it has control, even though it has put in only 13% of the registered capital. In many ways, corporate layering is even more important to the Chinese than the Koreans. While chaebol simply want to maximize control, mainland entities sometimes use this structure to hide ballooning debt. As part of its deleveraging campaign two years ago, Beijing pressed pause on costly public-private partnership projects. State-owned entities would insist on large minority interests on paper so they didn’t have to consolidate these infrastructure build-outs and report the new debt that arose from them higher up the chain.Beijing might be able to curb this behavior among its affiliates, but it can’t stop private entities from mimicking the chaebol structure. Real-estate developers, for example, have also used joint ventures to hide debt from their balance sheets. The trend of conglomerate structuring will only blossom in China.So how to structure the new TikTok Global makes a world of difference. ByteDance owning an 80% stake outright is a very different proposition from Oracle’s vision, which involves distributing the 80% proportionally to ByteDance’s current shareholders. The former leaves the Chinese firmly in control, while the latter is perhaps more palatable to the U.S. When it comes to voting rights, indirect stakes give you nothing. Trump’s claim that the U.S. will have control is self-serving. As a dealmaker, he’s a long way away from turning TikTok into an American company. He'd better have an army of corporate lawyers ready to scrutinize the art of layering.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Shuli Ren is a Bloomberg Opinion columnist covering Asian markets. She previously wrote on markets for Barron's, following a career as an investment banker, and is a CFA charterholder.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.