New bid for TikTok from Perplexity AI could give US government 50 per cent stake

According to sources familiar with the matter, AI startup Perplexity AI has submitted a new proposal to ByteDance, the parent company of TikTok, that would allow the US government to own up to 50% of a newly formed entity that would merge Perplexity with TikTok’s US operations. This proposal is a revised version of a previous plan submitted by Perplexity to ByteDance on January 18th, one day before the TikTok ban was set to take effect.

The previous proposal aimed to create a new structure merging San Francisco-based Perplexity with TikTok's US business, while bringing in investments from other investors. The new proposal, however, would allow the US government to own up to half of the new structure when it reaches a minimum of $300 billion (approximately A$475 billion) in an initial public offering (IPO). According to the source, Perplexity’s proposal was revised based on feedback from the Trump administration, but the person was not authorized to discuss the proposal publicly.

The source also stated that if the plan is successfully implemented, the government’s stake would not have voting rights, and the government would not have a seat on the new company’s board of directors. ByteDance and TikTok have not immediately responded to requests for comment. According to the plan, ByteDance would not have to completely sever ties with TikTok, which is a favorable outcome for investors, but it must allow “complete control by a U.S. board.”

Under the proposal, the Chinese tech company would contribute TikTok’s US operations, but not the proprietary algorithm that drives what users see on the app. This proposal appears to echo the strategy discussed by former Treasury Secretary Steven Mnuchin during Trump’s first term on Fox News’ “Sunday Morning Futures,” that new investors in TikTok could simply “dilute” Chinese ownership to satisfy legal requirements. Mnuchin had previously expressed interest in investing in the company. “But the technology needs to be decoupled from China,” he added. “It needs to be decoupled from ByteDance. China would never allow us to have something like this in China.”

Perplexity's proposal comes as several investors have also expressed interest in TikTok. President Trump said late Saturday that he expects a deal to be reached within 30 days. On Air Force One, flying from Las Vegas to Miami, Trump also stated that although there were reports that Oracle and its outside investors were considering taking over TikTok's global operations, he had not discussed the matter with Oracle CEO Larry Ellison. “A lot of people are talking to me, very important people,” Trump said. “We have tremendous interest in this, and the United States will be a big beneficiary. … I would only do it if the U.S. benefits.”

According to a bipartisan law passed last year, TikTok would be banned in the US if it did not sever ties with ByteDance by January 19th. The Supreme Court upheld the law, but Trump subsequently issued an executive order suspending enforcement of the law for 75 days. Trump noted on Air Force One that Ellison’s home was “right near” his Mar-a-Lago estate, but added, “I’ve never spoken to Larry about TikTok. I’ve spoken to a lot of people about TikTok, and there is tremendous interest in TikTok.”

TikTok briefly shut down its service in the US a week ago, but went back online after Trump indicated he would delay the ban. TikTok CEO Shou Zi Chew attended Trump’s inauguration on January 20th, as did some other tech leaders, who have been working to build a more amicable relationship with the new administration. Congress voted to ban TikTok in the US over security concerns about TikTok’s ownership structure. The Biden administration has argued in court for months that allowing a Chinese company to control the algorithm that drives what users see on the app is too risky. Officials have also expressed concern about the user data collected on the platform. However, the US has not publicly presented evidence to date that TikTok has transferred user data to Chinese authorities or allowed them to tamper with its algorithm.