Benzinga - by Shanthi Rexaline, Benzinga Editor.
Amidst talks of a potential TikTok ban, Kevin O’Leary of “Shark Tank” fame expressed interest in purchasing the Chinese-owned app on Thursday.
What happened: O’Leary revealed that several groups are forming to bid for TikTok, and he’s among those interested. He emphasized his recognizable brand and vision to transition TikTok into an American-owned platform.
“And you have to be a steward to change it from TikTok China to TikTok USA,” he said.
However, O’Leary acknowledged a potential obstacle: the Chinese government’s reluctance to relinquish TikTok’s algorithm, a vital asset for the platform’s operation and value. “But the algorithm is where you serve up the videos, you know, the preferences and the purchase behavior for the last few years is very valuable,” he added.
If the Chinese government does not allow the passing on of the algorithm, what a potential U.S. buyer would get is the brand TikTok domestically, which is valuable, and 170 million users but no data, O’Leary said. “I think, really, there’ll be no algorithms. You have to rewrite the algorithm. That’s complicated.” he added.
O’Leary pointed to Twitter, which was bought by Elon Musk for $44 billion and has since then been renamed X. While the deal was done at a $44 billion valuation 18 months ago, today it is worth $12 billion to $16 billion, with two-thirds of the valuation vaporizing after tweaking the algorithm, he said.
His bidding for TikTok will start at $20 billion to $30 billion, the investor said.
Government Nod Is Key: O’Leary said the White House’s backing is important. “But this deal is not going to happen without the endorsement of whoever’s in the White House when it actually comes to market, which will probably be in January or February next year,” he said.
The television host does not expect Senate Majority Leader Chuck Schumer (D-NY) to advance the TikTok ban legislation before the election. “This is the fourth attempt to sell it. But now you’ve got bipartisan interest in this bill, and it’ll probably pass right after the election, and then it’ll be jump off to see who gets it,” he said.
Kevin O’Leary sees two ways how the TikTok ban move will play out. Like India, where the Chinese app had 200 million users, the U.S. could opt to simply turn off the app, which could be tantamount to a “cognitive warfare on the algorithm,” he said.
Alternatively, one can expect what happened with the gay dating app Grindr, the investor said, adding that the U.S. government raised security concerns over its Chinese ownership and forced sale to bring it back to U.S. control.
“It’s an unknown, but there’s value here today. Now, if we can’t get this thing done, that’s fine,” he said.
O’Leary also said there is a lot of interest among investors to join syndicates to buy TikTok. He said he would go scouting for capital early next month. ” I’m going to go to sovereign wealth for that and pension plans. I’m leaving on April 3rd to crisscross Europe and the Middle East to find out who’s interested in this deal,” he said.
The media personality wants to bring on board whoever is going to occupy the White House next year and said he talked to former President Donald Trump about this week. “I know I need his endorsement. I’ll do the same with Biden’s administration. I mean, I’m agnostic. I’m completely bipartisan on this. But you’re not going to get this deal done without the White House and national security concerns,” he said.
Terming a potential TikTok deal as the most complex in social media, he said he was arranging coders domestically to build a new algorithm.
He also painted a dire scenario for the platform if no U.S. buyers emerge. “Unless there’s somebody else that wants to do it or U .S. government will just turn it off because they can’t agree with the Chinese on terms, he said.
“It’s an interesting deal and I like it,” he added.
A TikTok ban could prove to be a blessing for Meta Platforms, which is now finding huge traction with Reels, a copycat service it launched. Alphabet has its own version called YouTube Shorts. But these do not command as much popularity as TikTok.
The Communication Services Select Sector SPDR Fund (NYSE:XLC) ended Thursday’s session up 0.04% at $81.65, according to Benzinga Pro data.
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