The move, confirmed by Oracle on Sept. 14, ends an extended pursuit by Microsoft Corp. of the wildly popular short-form video platform, which has more than 100 million users in the United States.
TikTok has offices in multiple U.S. locations, including its largest office in Culver City.
Under terms of the agreement, Oracle, which is led by co-founder and chief executive Larry Ellison would take a minority stake in TikTok and become the company’s U.S. technology partner. Ellison is a prominent donor to President Donald Trump, whose executive order triggered the deal.
According to the agreement, TikTok’s global business would become a U.S.-based company and remain a unit of ByteDance, which would retain a majority ownership stake in the app.
Some existing ByteDance investors, including U.S. venture capital firms Sequoia Capital and General Atlantic, would receive stakes in the new business, according to the Wall Street Journal, which citied anonymous sources.
Walmart Inc., which joined the mix to bid for a TikTok deal in late August, will also take a stake, according to CNBC.
The deal is a strategic win for TikTok, according to Daniel Ives, an analyst at downtown-based Wedbush Securities Inc.
“From a national security perspective, Oracle as the back-end technology infrastructure vendor for TikTok will make sure any perceived ‘back doors’ to Beijing around data will be an issue in the rear-view mirror,” Ives wrote in a a report.
“With the potential shutdown by the government and the pending sale, some brands are wary to spend big dollars on the platform until these situations are solved,” said Ryan Detert, founder and chief executive of Beverly Hills-based social data technology company Influential Network Inc., which does business as Influential.
“As long as the U.S. government approves the structure, the pressure would be off. TikTok has over 100 million highly engaged users, and that is very appealing for brands who are looking to spend dollars and activate on social platforms,” Detert added.
Microsoft, the first company to announce publicly that it was pursuing an acquisition of TikTok, released a statement on Sept. 13 confirming it had come up short in its bid for TikTok’s U.S. operations.
Chinese officials on Aug. 28 updated rules on technology exports, which prohibits exporting technology including text analysis, voice recognition and content suggestions without a license from the Chinese government.
That gives Beijing the power to veto the sale of TikTok’s algorithm to its U.S. bidders.
“ByteDance never wanted to sell its TikTok U.S. operations. The current administration forced this move. The recent change to Chinese rules were likely put in place because of this act,” said Brad Gastwirth, chief technology strategist at Wedbush Securities. “It is unclear if Beijing will be okay with (the Oracle deal) or not, but likely will be given (that) no true sale occurred.”
While a TikTok divestiture was the original edict from the White House, the Chinese export rules “essentially put a poison pill in the deal around a sale to Microsoft,” according to Wedbush Securities’ Ives.
That made all the key players realize that an outright acquisition was impossible, and a partnership was the likely path forward, he said.