ByteDance Ltd., the Chinese parent of TikTok, is poised to capture about half of the profit from the video platform’s U.S. operations even after selling a majority stake to American investors, sources familiar with the matter tell Bloomberg.
The Beijing-based company is expected to collect a licensing fee on all revenue generated from TikTok’s algorithm, which will remain under its control, along with profit tied to its remaining equity stake. Taken together, these arrangements would likely give ByteDance 50% or more of the U.S. unit’s earnings once the new ownership structure takes effect, the people said, asking not to be identified because the terms are private.
Neither ByteDance, TikTok, nor the White House responded to requests for comment.
The deal is the latest development in a high-stakes saga that has spanned multiple U.S. administrations. President Joe Biden signed legislation requiring ByteDance to divest TikTok’s U.S. operations or face a shutdown. Since returning to office, Donald Trump has repeatedly delayed the deadline while negotiating a compromise, often crediting TikTok for boosting his 2024 election campaign.
Last week, Trump said he and Chinese President Xi Jinping had reached an agreement during a phone call, though Beijing has yet to confirm. Vice President JD Vance further muddied the waters by suggesting the sale could be valued at around $14 billion — far below analysts’ estimates of $35 billion to $40 billion.
The profit-sharing structure may help explain the discrepancy. Under the proposed plan, TikTok U.S. would pay ByteDance roughly 20% of incremental revenue for the right to use its algorithm — the recommendation engine widely credited with the app’s explosive growth. At $20 billion in revenue, for example, ByteDance could pocket as much as $4 billion in licensing fees.
In addition, ByteDance would take about 20% of profit from the remainder of the business, reflecting its projected equity stake. The remaining 80% would be distributed among a U.S.-led consortium expected to include Oracle Corp., Silver Lake Management, Abu Dhabi-based MGX, and existing investors.
The distribution of profits underscores why the administration’s proposed $14 billion price tag has drawn skepticism. “This could be the most undervalued tech acquisition of the decade,” said Ashwin Binwani, founder of Alpha Binwani Capital, who estimated the figure reflects just a third of TikTok’s true worth.
Vance noted that the final purchase price will ultimately be set by the acquiring investors. The timeline for finalizing terms remains unclear.
Following Trump’s latest remarks, the Chinese embassy in Washington reiterated its longstanding position: “The U.S. side needs to provide an open, fair and non-discriminatory environment for Chinese investors.”