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The United States has threatened to ban Tik Tok, a Chinese app that allows users to create short videos and share them with the world, if its Chinese owners don’t sell stakes in the company.
The threat comes as the US government looks to block China from taking over technology companies in an attempt to curb Beijing’s growing influence on foreign technology companies.
Tik Tok is owned by ByteDance, a Chinese Internet giant that also owns other Chinese social media apps like Douyin and Musical.ly. In recent months, ByteDance has been trying to take control of some of these same apps through acquisitions or investments.
But because of limits imposed by the Committee on Foreign Investment in the United States (CFIUS), ByteDance cannot own more than 25% of any one company unless it sells shares or assets worth at least $10 million.
ByteDance could seek to use its ownership stakes in Tik Tok and Douyin as a way around this restriction, but doing so would be risky for both Tik Tok and Douyin: Both apps are popular among young people in countries such as China, India and Indonesia. U.S. officials are threatening to ban TikTok from the U.S. if Chinese owners don't sell stakes in their video sharing app to American investors, Bloomberg reported Monday.
TikTok is owned by ByteDance, a Chinese company that has been valued at $50 billion by investors. The company has been looking for ways to get around the country's strict foreign ownership laws, which prohibit companies from having more than 15 percent of its shares controlled by foreign investors for 10 years after listing on a domestic exchange.
The company has said it will sell off most of its shares to Chinese investors, but the U.S. government wants its founder and CEO, Zhang Yiming, to sell his entire stake as well — or else face a big fine or an outright ban on doing business in America (which would hurt both him and other Chinese tech companies).
Last month, ByteDance announced that it would begin selling off its U.S.-listed shares over time, starting with 10 percent per year until it reached 50 percent ownership within three years. But according to Bloomberg's sources "the pace may be slower" than originally planned; instead of selling off all of its shares over time it may only be selling them slowly over two or three years instead.
The United States has threatened to ban TikTok from the country if it does not remove all Chinese-owned stakes in the video sharing app. The US Department of Justice (DoJ) filed a complaint in federal court on Wednesday, alleging that TikTok has violated the Foreign Corrupt Practices Act, which prohibits American companies from bribing foreign officials. The DoJ first brought its case against Chinese tech giant Alibaba Group Holding Ltd, which owns a stake in the app, last year.
According to the complaint filed by the DoJ, even though TikTok is headquartered in Singapore and its main office is located in California, it relies heavily on its Chinese parent company for operations. The DoJ said that TikTok has more than 100 million users across 180 countries, but is being used by “dozens” of state-owned enterprises and other entities from China.
A popular Chinese messaging app has been banned in the United States after it was accused of facilitating the sale of weapons to Mexican drug cartels.
TikTok, which is owned by ByteDance, has been blocked in the US since Thursday following a warning from the US Department of Justice (DOJ). The company said it had seen a "significant increase" in accounts that were banned for promoting or facilitating the sale of weapons and drugs.
The DOJ said that TikTok had been used to "facilitate sales of firearms and explosives." It added that there were also reports of users posting videos on TikTok that encouraged viewers to commit acts of violence.
"This is not an isolated incident; we are seeing an increase in illicit activity on these apps," acting assistant attorney general John Buretta said at a press conference on Friday.
