Benzinga - by Natan Ponieman, Benzinga Editor.
TikTok’s parent company, ByteDance, would rather face a shutdown, or ban, than sell, according to Reuters.
In a video, TikTok CEO Shou Chew promised that the Beijing-based company would first fight the ban in court.
The video currently has almost 3 million views. TikTok boasts roughly 170 million users.
President Joe Biden recently signed into law a bill that gives ByteDance nine to 12 months to sell its U.S. assets to a domestic buyer. Otherwise, it faces an outright ban.
The bill saw bipartisan support in the House and Senate.
Observers argue that a ban could benefit the platform's main competitors in the U.S., including Meta Platforms Inc (NASDAQ:META) and Snap Inc (NYSE:SNAP) — both of which count members of Congress as investors.
Lawmakers argue the decision stems from a series of classified briefings from the FBI, the Justice Department and the Director of National Intelligence.
Last week, Meta lost over 15% of its value in one day after reporting worse-than-expected quarterly results. The lackluster earnings report was strong enough to counteract positive speculation around the TikTok bill.
Conversely, Snap shares rose more than 25% last week after reporting quarterly earnings of $46 million, compared to $1 million in the prior year.
Shou insists the bill was designed to ban the app.
"Make no mistake, this is a ban. Many who sponsor the bill admit a TikTok ban is their ultimate goal," he said.
TikTok: ‘We Aren’t Going Anywhere’ TikTok is known for its recommendation algorithm, which has been touted as the "secret sauce" behind its massive global success.
The issue has extra complications for the company, which is stuck between the geopolitical interests of the world's two largest economies.
While the U.S. government is deeming TikTok a national security risk, China has a hold over the company's ability to sell its U.S. platform. Since TikTok's recommendation algorithm is listed in the country's export-control list, China could decide to block the sale altogether.
That would leave ByteDance with the option of selling TikTok's brand and design without its algorithm.
But, according to Shou, a legal fight will transpire before a sale.
"Rest assured, we aren’t going anywhere. We're confident and we will keep fighting for your rights in the courts," said Shou.
Shou also hinted at the idea the ban is threatening freedom of expression in the U.S. in his video statement.
"It's actually ironic, because the freedom of expression on TikTok reflects the same American values that make the United States a beacon of freedom," said Shou.
First Amendment Vs. National Security: Legal experts quoted by The Verge agree that the unconstitutionality of the ban is the strongest claim the company has against the law.
Yet the national security aspect of the legislation makes it especially hard to challenge in court, as courts are normally reluctant to overstep Congressional decisions regarding national security matters.
The TikTok challenge will first go to the D.C Circuit Court, the main court of appeals for issues of constitutional law, and second in line after the Supreme Court.
What will ultimately be debated in court — and in the public sphere — is whether national security concerns trump the First Amendment in this specific scenario.
ByteDance has yet to file a claim, but experts are expecting legal action to come from business owners and influencers who lean on the app to keep their businesses running.
Now Read: TikTok Will Stop Paying People For Using The App After EU Raised Addiction Concerns
Shutterstock image.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.