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Why is the US negotiating a deal with TikTok?
The US government is pushing for TikTok's sale due to national security concerns and data privacy issues. Legislation signed in 2024 requires ByteDance, TikTok's parent company, to divest its US operations or face shutdown. The negotiations aim to find a solution that addresses these security worries while allowing TikTok to continue operating in the US.
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What does the deal mean for TikTok's valuation?
The deal is leading to a much lower valuation for TikTok than its market worth. Reports suggest that due to profit-sharing arrangements and regulatory pressure, ByteDance could receive over 50% of US TikTok profits despite owning only 20%. This has sparked debate about whether TikTok is being sold at a 'fire sale' price, far below its actual value.
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How does profit-sharing work between ByteDance and TikTok?
Under the current negotiations, ByteDance, TikTok's parent company, might retain a significant share of the profits generated in the US. Despite owning a minority stake, ByteDance could receive over half of the profits, which impacts the app's valuation and the financial benefits for the Chinese company.
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What are the political implications of this deal?
The deal is heavily influenced by political tensions between the US and China. US officials, including former President Trump, have used the sale as a strategic move amid broader geopolitical conflicts. The negotiations reflect concerns over data security, international relations, and the influence of Chinese technology companies in the US.
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Could this deal affect TikTok users in the US?
Yes, the outcome of the deal could impact TikTok users by determining whether the app remains available and how it operates. If the sale goes through, users might see changes in data policies or app features, depending on the terms of the agreement and regulatory requirements.
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Is TikTok's valuation really as low as reports suggest?
Many experts believe TikTok's true value is much higher than the reported $14 billion. The low valuation is likely a result of regulatory pressure and profit-sharing arrangements, which may not reflect the app's actual market potential and revenue streams.