In a landmark move that could reshape the landscape of social media and U.S.-China tech relations, ByteDance has officially signed agreements to divest a majority stake in TikTok's U.S. operations to a consortium of investors.
The deal, announced on December 18, 2025, is set to close on January 22, 2026, effectively creating a new joint venture aimed at addressing long-standing national security concerns.
TikTok CEO Shou Zi Chew detailed the arrangement in an internal memo to employees, framing it as a step toward ensuring the platform's longevity in the American market while maintaining some ties to its Chinese roots.
This article unpacks the specifics of the transaction, supplemented with insights from recent reports, highlighting both the progress and the unresolved ambiguities that could influence TikTok's future.
The Deal's Framework: A Strategic Spin-Off
The agreement transforms TikTok's U.S. entity into a joint venture controlled primarily by American and allied investors. Oracle, Silver Lake, and MGX - a sovereign wealth fund from Abu Dhabi - will collectively hold 45% of the new company, with each taking a 15% stake. This structure positions them as the managing investors, granting significant influence over operations.
ByteDance, TikTok's parent, will retain a direct 19.9% ownership - deliberately below the 20% threshold that could trigger blocking rights under U.S. regulations. An additional 30.1% will go to "affiliates of existing ByteDance investors," effectively keeping about half of the company under indirect Chinese control.
The ownership of the remaining 5% remains undisclosed, adding a layer of opacity to the transaction.
This setup comes after years of scrutiny, including threats of a U.S. ban under the Protecting Americans from Foreign Adversary Controlled Applications Act, signed into law in April 2024. The deal aims to comply with this legislation by shifting control away from ByteDance, which has been accused of potential data risks tied to the Chinese government.
In his memo, Chew emphasized that the joint venture builds on TikTok's existing U.S. infrastructure, with the goal of fostering innovation while safeguarding user data. The transaction, valued implicitly through the stakes, reflects a compromise: ByteDance avoids a full exit, retaining influence without outright dominance.
Navigating the Algorithm Conundrum
At the core of past controversies lies TikTok's powerful recommendation algorithm, often cited as a "black box" potentially vulnerable to foreign manipulation. The deal's memo addresses this head-on but leaves room for interpretation.
Chew outlined plans to retrain the U.S. algorithm exclusively on American user data, with Oracle overseeing data protection and storage. All content moderation and verification policies will be managed from the U.S., ensuring compliance with local laws and reducing risks of censorship or propaganda.
However, details on how the algorithm will be separated or "retrained" remain vague. Critics argue this could be a superficial fix, as the core code might still draw from ByteDance's global systems.
A Reuters report notes that the arrangement includes commitments to U.S. data sovereignty, but skeptics point to past failed attempts, like Project Texas in 2022, which aimed to ring-fence U.S. data but faced ongoing audits and leaks.
Oracle's role as a "trusted technology partner" echoes its involvement in earlier proposals, where it was tasked with reviewing TikTok's source code for security. Despite these assurances, the lack of transparency on the 5% stake and affiliate investors raises questions about indirect influences on algorithmic decisions.
Broader Implications and Investor Dynamics
This deal not only averts a potential ban but also injects fresh capital and expertise into TikTok U.S. Oracle brings cloud computing prowess, Silver Lake offers private equity experience from deals like Dell and Twitter, and MGX adds Gulf investment muscle, diversifying away from pure U.S. control.
Chew's memo highlights that the venture will prioritize U.S.-based growth, potentially accelerating features tailored to American audiences amid competition from Instagram Reels and YouTube Shorts.
Yet, the structure suggests a calculated retention of Chinese leverage. With ByteDance and its affiliates holding nearly 50%, Beijing's influence persists, albeit diluted.
This mirrors broader trends in global tech divestitures, such as Uber's sale of its China operations to Didi in 2016, where minority stakes preserved long-term interests.
Analysts estimate TikTok's U.S. valuation at around $100 billion, making this one of the largest tech deals of the decade. The involvement of MGX, backed by Abu Dhabi's Mubadala, underscores shifting geopolitical alliances, as Middle Eastern funds increasingly bridge U.S.-China divides.
A Hushed Resolution or Strategic Slice?
As Chew noted in the memo, "there's more work to be done" before closure, including regulatory approvals from bodies like CFIUS (Committee on Foreign Investment in the United States). While the deal appeases U.S. lawmakers by placing content policies stateside, it arguably glosses over deeper issues, allowing ByteDance to "pinch off" a profitable segment while retaining core IP. This could set a precedent for other Chinese apps like Shein or Temu facing similar scrutiny.
In essence, the agreement buys time for TikTok, which boasts over 170 million U.S. users as of 2025. Whether it fully resolves security fears or merely delays them remains to be seen. As the January 22 deadline approaches, all eyes will be on how this hybrid ownership model performs in practice, potentially redefining cross-border tech governance.
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Author: Slava Vasipenok
Founder and CEO of QUASA (quasa.io) - Daily insights on Web3, AI, Crypto, and Freelance. Stay updated on finance, technology trends, and creator tools - with sources and real value.
Innovative entrepreneur with over 20 years of experience in IT, fintech, and blockchain. Specializes in decentralized solutions for freelancing, helping to overcome the barriers of traditional finance, especially in developing regions.
