If ByteDance, the company that owns TikTok, uses all of its legal options to oppose legislation that would remove the platform from U.S. app stores, the Chinese business would sooner close down its loss-making app than sell it, according to four people.

According to people close to ByteDance, the algorithms TikTok uses to run its business are seen to be essential to the company’s entire operations, making the sale of the app doubtful.

The parent company of ByteDance stated that, in the worst situation, they would prefer to have the app shut down in the United States rather than sell it to a potential American buyer because TikTok only contributes a small portion of ByteDance’s daily active users and total earnings.

The individuals, who wished to remain anonymous because they were not permitted to speak to the media, claimed that a shutdown would have little effect on ByteDance’s operations and that the company would not have to give up its basic algorithm.

ByteDance chose not to respond.

In response to an article published by The Information stating that ByteDance is considering options for selling TikTok’s U.S. business without the algorithm that suggests videos to TikTok users, the company announced late on Thursday that it had no plans to sell the video platform. The statement was posted on Toutiao, which it owns.

A TikTok representative cited ByteDance’s Toutiao statement when responding to a Reuters query for comments.

One music label executive who sees possible benefits from a U.S. ban on Tiktok is JP Morray.

CEO of TikTok Shou Zi Chew stated on Wednesday that the social media business anticipates winning a court battle to overturn a rule signed by President Joe Biden that, among other things, outlaws the company’s well-known short video app, which is used by 170 million people in the United States.

Congressmen in the United States are deeply concerned that China may obtain American data or utilise the app for spying purposes. This concern is what led to the bill’s overwhelming approval by the Senate on Tuesday.

One day before his tenure is about to end, on January 19, Biden’s signing sets a deadline for a sale. However, if he finds that privately held ByteDance is moving forward, he may decide to extend the date by an additional three months.

ByteDance does not make available to the general public the financial information of any of its units or its own performance. According to multiple sources, the company still generates the majority of its revenue in China, mostly from its other apps like Douyin, which is TikTok’s Chinese version.

A different source with direct information stated that approximately 25% of TikTok’s total revenue came from the United States last year.

In an interview with Reuters, over six investment bankers stated that it was difficult to determine TikTok’s valuation in comparison to its like-for-like competitors, Facebook and Snap, because the company’s financial information is not readily accessible or generally available.

According to two of the four sources, ByteDance’s 2023 revenues increased from $80 billion to about $120 billion. According to one of the sources, the daily active users of TikTok in the United States account for only 5% of ByteDance’s DAUs globally.

According to three of the sources, TikTok and domestic ByteDance products like the short video platform Douyin use the same underlying algorithms. One of them stated that its algorithms are thought to be superior than those of ByteDance’s competitors, Tencent and Xiaohongshu.

According to the sources, TikTok’s intellectual property licence is filed under ByteDance in China, making it challenging to separate from the parent firm, making it impossible to divest the platform.

According to the insiders, ByteDance is unlikely to contemplate the highly complex process of separating the algorithms from TikTok’s U.S. assets.

The four people claimed that ByteDance would not consent to give over one of its most significant assets—its “secret source”—to competitors, with reference to the TikTok algorithm.

The Trump administration attempted to outlaw Chinese-owned WeChat and TikTok in 2020, but the courts stopped them. Since then, the United States and other nations have attempted and partially banned the short-form video app.

A compulsory TikTok app divestment was hinted at by China during a March 2018 U.S. congressional hearing. China is likely to reject the proposal.

“China will firmly oppose it (the forced sale of TikTok),” a Ministry of Commerce spokesman declared during a late-March 2023 news conference in Beijing.

“The sale or divestiture of TikTok involves technology export and must go through administrative licencing procedures in accordance with Chinese laws and regulations.”

The Export Control Law, which China unveiled in 2020, expanded the definition of “controlled items” from earlier drafts in the final wording. The amendment makes sure that exports of algorithms, source codes, and comparable data are subject to permission procedures, according to state media.

According to two of the persons, TikTok’s primary assets, excluding algorithms, are user data and product operations and management.

Steven Mnuchin, the former U.S. Treasury Secretary, has indicated interest in organising an investor group to attempt to acquire TikTok. According to the sources, ByteDance might have trouble finding any takers for TikTok’s US assets, except algorithms.

When ByteDance sought to buy back about $5 billion worth of shares from investors in December, Reuters claimed that the company was valued at $268 billion. ByteDance is supported by KKR & Co , General Atlantic, Sequoia Capital, and Susquehanna International Group, among others.

(Adapted from Reuters.com)