TikTok CEO Shou Zi Chew’s Capitol Hill testimony was a “moment of disaster” for the company that is likely to raise calls for the company to sell or outright ban the problematic platform, according to Wall Street. Analysts are predicting.
Chu angered lawmakers with evasive or unclear testimony during a closely watched House hearing on Thursday, including TikTok’s ties to China and its failure to crack down on harmful content for minors. It included detailed information about
Wedbush analyst Daniel Ives says the window for TikTok’s Beijing-based parent company, ByteDance, to sell the company before a ban is imposed by the end of the year is rapidly closing. rice field.
“We think it will be very complicated in three to six months with a low spin-off probability for ByteDance and TikTok to settle their sale to a US tech company,” Ives told clients Thursday. said in a note.
“If ByteDance opposes this forced sale, TikTok will likely be banned in the US by late 2023.”
Ives said Chew’s performance was a “moment of disaster” for the company.
Angelo Zino, a senior equity analyst at CFRA Research, reached the same conclusion, but takes a longer view of the possibility of TikTok being sold or banned.
“I don’t think Zhu’s remarks will allay concerns that sensitive TikTok data will end up with the Chinese government,” Zino said.
“We believe a full sale or ban will become increasingly likely over the next 12 to 18 months,” he added.
At the hearing, Chew acknowledged that some ByteDance employees may still have access to US user data.
The TikTok boss was trying to allay lawmakers’ concerns by touting a $1.5 billion investment in an initiative called “Project Texas.”
Chew also argued that TikTok is more transparent than other Big Tech rivals, pointing to the company’s promise to release its source code for third-party review.
But lawmakers rejected Chu’s endorsements and targeted TikTok over concerns that China could use the app to spy on or influence American users.
The company has also been accused of failing to curb harmful TikTok “trends” and content such as videos glorifying suicide and videos calling for violence against lawmakers.
A potential ban on TikTok has received bipartisan support, but with the platform so popular among potential voters, a sale is the more likely outcome, Zino said.
“Politicians need to act carefully to ban platforms (+150 million users) that are very popular with voters (ages 18-45),” said Zino. . “If banned, SNAP should be the biggest beneficiary.”
Shares of Snapchat’s parent company, Snap Inc., were up 3% in Thursday trading, as Chu testified. Shares of Meta, the parent of Facebook and Instagram, surged 2% after he jumped.
In a statement after the hearing, a TikTok spokesperson said, “Shaw was ready to answer questions from Congress, but unfortunately the day was dominated by political grandstands and the realities already underway. I could not accept the solution of
The Biden administration was reportedly demanding that ByteDance executives sell their stake in TikTok or face a nationwide ban in the U.S. even before Mr. Chu came along. increase.
TikTok has denied direct ties to the Chinese Communist Party, but the Chinese government has frowned on the forced sale, saying it is “against” it.
