Ahead of a deadline set by President Donald Trump over video sharing app TikTok, Washington officials will evaluate a bid that could see US tech giant Oracle become a partner to a Chinese company that has been called a national security risk.
US Treasury Secretary Steven Mnuchin confirmed on Monday the government had received a bid from Oracle for TikTok's American operations after the video-sharing app's parent ByteDance rejected a proposal from Microsoft.
The transaction is being structured as a partnership and probably won't be an outright sale, The Wall Street Journal reported, citing unnamed sources.
"I will confirm that we did get a proposal over the weekend that includes Oracle as the trusted technology partner," Mnuchin said on CNBC, adding that the bid would be handled by a government panel that reviews foreign transactions for national security concerns.
"We need to make sure that the code is, one, secure, Americans' data are secure, phones are secure, and we'll be having discussions with Oracle over the next few days with our technical teams," Mnuchin said.
Oracle confirmed its submission, saying the company "is part of the proposal by ByteDance to the Treasury Department over the weekend in which Oracle will serve as the trusted technology provider."
TikTok's brand of short, quirky videos made on users' cellphones has grown popular in the United States and beyond, but Trump's claims that TikTok could be used by China to track the location of federal employees, build dossiers for the purpose of blackmail and conduct corporate espionage has sparked a diplomatic storm between Washington and Beijing.
Trump effectively ordered the sale of the Chinese company's US operations by September 20, or else the app would shut down.
Microsoft bid nixed
TikTok has rejected the charges and sued over the crackdown, contending that the US order was a misuse of its International Emergency Economic Powers Act because the platform is not "an unusual and extraordinary threat."
In late August, China's commerce ministry published new rules potentially making it more difficult for ByteDance to sell TikTok to an American entity by adding "civilian use" to a list of technologies that are restricted for export.
ByteDance had vowed to "strictly abide" by the new export rules.
Downloaded 175 million times in the United States, TikTok is used by as many as a billion people worldwide. It has repeatedly denied sharing data with Beijing.
Microsoft had indicated at the beginning of August that it was interested in acquiring TikTok's US operations, but announced Sunday that bid had been rejected.
"We believe Microsoft would only buy TikTok with its core algorithm, which the Chinese government and ByteDance was not willing to budge," Wedbush analyst Daniel Ives said in a note.
"Given the need now to get a green light from Beijing after its export rules were changed a few weeks ago, TikTok's days in the US likely are numbered with a shutdown now the next step."
S&P warned Monday that the transaction for TikTok could result in a downgrade of Oracle's credit rating, depending on whether the company needs to take on significant debt for the transaction.
"A deal in which Oracle is a technology partner rather than a full owner could lower the price," S&P said. "And if Oracle has co-bidders, that could further reduce the financial impact."
Shares of Oracle were temporarily halted shortly after the open due to the pending new on the company. Near 1500 GMT, shares were up 6.5 percent at $60.70.