TikTok may sell stake to US investors; move to help uphold market for Reliance in India

After India banned 59 Chinese apps, including Bytedance-owned short video platform TikTok, countries like the US and Australia have brought the company under the scanner over data security and privacy issues in their countries. 

To avoid further bans outside of China, the firm may sell a majority stake to its US-based investors General Atlantic and Sequoia Capital, according to a report by The New York Times.

Tiger Global and Softbank are considered the Chinese-owned company’s big investors. 

It is pertinent to note that General Atlantic has key investments in firms including Byju’s NoBroker, Reliance Jio, DMart, Uber and Facebook, among others. The company recently pumped in ₹6,598 crore in Reliance Jio. Similarly, Facebook, its portfolio company, invested ₹43,574 crore in Jio.

Similarly, Sequoia Capital’s investee companies include Apple Inc, Google, and LinkedIn, among others. Google too invested ₹33,737 crore in Jio in a recent deal. 

“The change of hands could save the app from drowning globally. It may revive its chances in the Indian market with the US investors having a direct or indirect link to some of its competing platforms,” a source in the industry said. 

Both the TikTok investors’ investee companies are, in a way, competing with TikTok to gain market share in their respective countries. If the ownership gets transferred to US investors, it may uphold the market for Reliance in the short-video segment in India and for Facebook or Instagram in the US market. The investors may force mergers in certain segments to gain control of the market.

Soon after the ban, TikTok distanced itself from having any links with the Chinese government and assured the Indian government that they functioned well within the ambit of Indian law. However, with the border tensions escalating, the Indian government is unrelenting with regard to easing norms for Chinese apps.

The Indian government gave three weeks to respond and posed 70 odd questions to Chinese companies over the alleged violation of provisions of the Information Technology Act. Though the timeframe given to respond ended this week, despite the companies holding a meeting with the Indian government, the issue still lingers without any headway.  

In fact, the Ministry of Electronics and Information Technology (MeitY) on July 21 issued another warning to Chinese firms that continued availability and operation of banned apps, directly or indirectly, was an offence under the IT Act, and asked them to strictly go by the law.

US President Donald Trump sought a similar ban on TikTok in the US. The app has nearly 50 million users in the US and 800 million global users with an estimated valuation of $100 billion. 

During the election campaign last week, Trump alleged that TikTok was “spying” on American users. Besides, Secretary of State Mike Pompeo had also said the government would consider banning TikTok. Furthermore, a Senate panel in the US asked federal employees of the nation to not use Tiktok. 

Report also emerged that TikTok was mulling over a plan to shift its headquarters to London as part of a strategy to distance itself from its Chinese ownership. 

Meanwhile, Pakistan, which temporarily banned the popular game ‘Player Unknown’s Battle Grounds’ (PUBG), also banned Chinese live-streaming app Bigo in the country this week.

TikTok has also come under the scanner over inappropriate content on its platforms.