The Chinese parent company of TikTok is set to retain nearly half of the profits generated by its US operations, even after transferring majority control to American investors. This shift is part of a deal encouraged by President Trump.
According to sources familiar with the situation, TikTok will still receive substantial revenue through its valuable algorithm and profit shares from remaining investments linked to its US operations.
Once the transaction concludes, it’s estimated that over 50% of TikTok’s US revenue will remain tied to the parent company, as reported by Bloomberg News.
This arrangement could be significant, especially since the valuation of TikTok’s US business has been pegged at around $14 billion—though analysts had expected figures between $35 billion and $40 billion.
Ashwin Binwani, founder of Alpha Binwani Capital, suggested that this deal might be one of the most underestimated tech acquisitions in years.
Under the draft agreement, TikTok US is also expected to pay a fee that amounts to about 20% of the revenue produced by its algorithm.
For instance, if TikTok generates $2 billion in sales, expected refunds could push revenues to $4 billion.
Beijing-based TikTok maintains about 20% of its revenue from the remaining ownership stake.
The consortium of US buyers includes Oracle Corp., Silver Lake Management, and Abu Dhabi-based MGX, along with other current investors.
Together, they hold approximately 80% of TikTok in the US.
Despite Trump’s assertions about making a deal with Chinese President Xi Jinping following a recent call, the transaction remains unconfirmed.
The Chinese government has yet to acknowledge the agreement publicly, and the finer details are still being hashed out.
Vice President JD Vance indicated that the final sale price, rumored at $14 billion, will ultimately be decided by the investors involved.
Previously, the Biden administration mandated that TikTok America must be sold or face a ban nationwide. Trump had pushed back deadlines and facilitated discussions with potential buyers, suggesting that supporting the app could bolster his chances in the 2024 election.
The post is awaiting a response from TikTok and the White House regarding the ongoing negotiations.
Meanwhile, the Chinese Embassy in Washington remarked that the US should create a fair and non-discriminatory environment for Chinese investors.
With the profit-sharing structure still unclear, analysts caution that American buyers could gain a significant edge in the short video market, which boasts apps generating over $10 billion annually.
