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Does TikTok/Oracle/WalMart ‘Partnership’ Accomplish Anything?

Courtesy of ZeroHedge View original post here.

Update (1205ET): From the minute Oracle emerged as the 'victor' in the battle to purchase TikTok US, it was clear to many that the reason the proposal submitted by the Microsoft/Wal-Mart team had been rejected was because this actually wasn't a "deal" after all. Somehow, Oracle had managed to read the tea leaves. From the earliest days of the talks, Larry Ellison's company had been said to be favoring an approach that would look more like a licensing deal than a buyout.

In a column on the news published Monday in the Verge, policy editor Russel Brandom gets right to the point: "Oracle's TikTok deal accomplishes nothing," the piece blares in the headline.

In the hours since it was written, the relationship has gotten even more complicated, with Wal-Mart reportedly getting a piece of the action, according to the Chinese press.

On Sunday night — just two days before the deadline set by Microsoft — the TikTok deal finally came through. Oracle will be taking over stewardship of TikTok’s US operations, after Chinese parent company ByteDance turned down a more ambitious bid from Microsoft. This morning, Treasury Secretary Steven Mnuchin confirmed the deal and said it would be presented to President Trump with a recommendation later this week. But barring a complete catastrophe, TikTok will keep operating in the US. However weird the details are, TikTok’s 1,400 US employees and tens of millions of US users are breathing a sigh of relief this morning.

But the last-minute sale is strange in a number of ways — for a start, it’s not a sale at all. After months of insistence that TikTok sever its US operations from Chinese ownership, we’re now settling for a vague partnership between Oracle and the US TikTok operation. It’s still unclear exactly what Oracle’s “trusted tech partner” status entails, but it’s definitively not a sale, and it’s unlikely Oracle is taking over any significant operations from the US TikTok offices. Microsoft’s version of the deal would have severed American TikTok from Europe and Asia entirely, but Oracle’s version of the deal leaves it mostly intact. US TikTok will stay the same as Korean TikTok and Nigerian TikTok; it’s just getting an extra babysitter. That makes it less of a sale and more of a glorified hosting deal. It lets Trump say he’s solved the problem but doesn’t do much else.

Aside from Oracle collecting checks for serving as a "glorified babysitter", like the Verge points out, Jasper Lawler, the head of research at LCG Trading, argued that this deal is the "latest evidence that the US is moving in a direction of China-style state capitalism".

This would mean, in effect, that while saying it's trying to hold China accountable for "national security" violations, the Trump administration is, in fact, trying to assert more unilateral control over Chinese companies in the US. Some might call that giving the Chinese a taste of their own medicine. Many others would call it hypocrisy, or a corruption of America's free-market values.

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Update (1105ET): In an odd turn of events, Caixin  news agency reports that, according to a high-level person close to ByteDance, the cooperation between TikTok and American companies is not limited to Oracle, but also includes Wal-Mart:

"The cooperation with Wal-Mart is mainly in the direction of e-commerce."   

The market automatically bid WMT higher on the headline, but is fading now…

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Update (0950ET): Oracle has just confirmed what Mnuchin said earlier about its deal to become TikTok's US partner.


Here's the (extremely brief) statement.

REDWOOD SHORES, Calif., Sept. 14, 2020 /PRNewswire/ — Oracle confirms Secretary Mnuchin's statement that it is part of the proposal submitted by ByteDance to the Treasury Department over the weekend in which Oracle will serve as the trusted technology provider.  Oracle has a 40-year track record providing secure, highly performant technology solutions.

Notice Oracle's phrasing: the company will serve as "the trusted technology provider" for TikTok, not a buyer.

After they started trading following a brief halt by the exchange, the company's shares surged early, but have fallen now that Oracle has emphasized once again that the only thing it "acquired" was a new client.

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Oracle shares surged Monday morning following last night's late-breaking surprise that the Redwood City-based company, founded by one of President Trump's biggest backers in Silicon Valley, had beat out Microsoft and Wal-Mart to become TikTok's licensing partner in the US.

Reporters were quick to point out that the "deal" wasn't actually a "sale". Beijing imposed new restrictions earlier this month that would block the sale of TikTok's "secret sauce" content-recommendation algorithm – hardly a "strategic asset" but certainly the most valuable component of TikTok's business – effectively making a sale untenable.

But in a wide-ranging interview Monday morning with the hosts of CNBC's "Squawk Box", Mnuchin said that the White House had looked at Oracle's offer, and that CFIUS would now be reviewing the deal. A verdict is expected before the official sale deadline, which is Sept. 20, Mnuchin clarified, helping to dispell some initial confusion about whether the date was Sept. 15 or Sept. 20.

Microsoft, which was working with Walmart to make a combined bid, had been seen as the more likely winner earlier in the process, but that was before Beijing sent the message over the weekend that it wouldn't allow the algorithm to be sold.

Then, reports about talks cooling emerged, resulting in Microsoft not being asked to make revisions to its offer. Previously, there was speculation that Oracle might have an advantage if the ByteDance started getting cold feet about an outright sale of the US business. Oracle shares were up double-digits in permarket trade.

CFIUS is a panel within the Department of Commerce that must review and approve deals involving foreign buyers that could have implications for national security.

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