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TikTok’s Chinese owner is poised to keep roughly half the profits from the app’s US business — even after ceding majority ownership to US investors under a deal pushed by President Trump, according to a report.
People familiar with the talks told Bloomberg News that ByteDance would pocket both a licensing fee for TikTok’s prized algorithm and a profit share tied to its remaining equity stake in the US venture.
That would likely leave ByteDance with a total of 50% or more of TikTok US earnings once the sale is completed, according to Bloomberg.
The arrangement may help explain the Trump team’s floated $14 billion valuation for the US unit — a number that fell sorely short of analyst estimates of $35 billion to $40 billion.
The US-backed buying group is expected to include Oracle Corp., Silver Lake Management and Abu Dhabi-based MGX, alongside existing investors. Collectively, they would hold about 80% of TikTok US.
Sources told The Post that some of the big US investors controlling the new US TikTok are currently investors in Bytedance who will be “rolling” their shares into the new entity to avoid a major taxable event. Accordingly, the sources said it may be that US investors will account for a chunk of the 50% of profits that are said to be going to Bytedance.
Nevertheless, under the draft plan the Chinese also are getting paid a fat licensing fee — about 20% of revenues generated through the “special sauce” recommendation algorithm that will be tweaked by Oracle to address US security concerns.
At $20 billion in sales, for example, that would amount to $4 billion for ByteDance, according to a source — coming directly out of US TikTok’s revenue and thereby deflating its value. The Beijing-based company also would retain about 20% of profits on the remaining revenue through its ownership stake.
That didn’t stop some experts from raising questions about the rock-bottom valuation for US TikTok that got disclosed late Thursday.
Ashwin Binwani, founder of Alpha Binwani Capital, told Bloomberg News that the proposal “could be the most undervalued tech acquisition of the decade,” arguing the figure reflects just a third of TikTok’s true worth.
The deal remains unresolved despite Trump’s insistence that he struck an understanding with Chinese President Xi Jinping during a call last week.
Chinese officials have not publicly confirmed any agreement, and the exact terms are still being negotiated.
Vice President JD Vance, who revealed the $14 billion price tag on Thursday, conceded that the ultimate purchase price will be determined by the investors.
The Biden administration had previously signed legislation requiring ByteDance to divest TikTok US or face a nationwide ban. Trump has repeatedly extended the deadline while brokering talks with buyers, claiming support on the platform helped secure his 2024 election win.
The Post has sought comment from ByteDance, TikTok and the White House.
The Chinese embassy in Washington told Bloomberg News that the US “needs to provide an open, fair and non-discriminatory environment for Chinese investors.”
With the profit-sharing structure still in flux, analysts warn that US buyers could be paying bargain-basement prices for an app that dominates the short-video market and generates more than $10 billion a year in American revenue.