Investors Respond to TikTok Executive Order

Photo Credit: Jonathan Kemper

President Trump signed the ‘TikTok executive order’ yesterday, certifying that a deal to transfer majority ownership of TikTok to American stakeholders is a go. But the supposed valuation at $14 billion has investors reacting.

The executive order mandates Chinese parent ByteDance to reduce its U.S. ownership stake below 20%. American investors—involving prominent names like Oracle, Silver Lake, and MGX—are expected to acquire roughly 80% of TikTok’s U.S. business. This restructured entity is projected to be valued at $14 billion—a much lower figure than analyst estimates ($35-$40B).

Despite relinquishing control, ByteDance stands to continue profiting substantially from TikTok USA. According to several insiders speaking to Bloomberg, ByteDance will receive both a licensing fee for TikTok’s proprietary algorithm and a profit share tied to its remaining equity in the U.S. venture. Sources say this will bring ByteDance to pocket close to 50% of all profit generated by TikTok US. That figure comes from ~20% as an algorithm licensing fee and roughly 20% as an equity-based profit share.

The licensing deal means TikTok U.S. must pay ByteDance for ongoing access to its recommendation algorithm, with one estimate noting this could equate to $4 billion in annual payments should the platform generate $20 billion in revenue. Ashwin Binwani, an analyst speaking to Bloomberg, said the proposal “could be the most undervalued tech acquisition of the decade.”

Investor reaction to the announced deal has been mixed. Some experts have criticized the deal as a ‘shakedown scheme.’ Others remain closely focused on the valuation mechanics and whether TikTok USA will continue to generate a profit stream. The platform will continue to be able to interface with the rest of the world, assuaging fears of a new app cordoned off from TikTok Global.

While TikTok USA will be in the hands of US investors, much of the profit will continue to pour into ByteDance coffers, thanks to licensing deals and its minority stake.