TikTok’s value has been estimated in the tens of billions of dollars © REUTERS

Microsoft has held talks to acquire TikTok, whose Chinese owner ByteDance faces mounting pressure from the US government to sell the video sharing app or risk being blacklisted in the country, said people briefed on the matter.

The approach to buy TikTok was at an early stage, and it was unclear whether Microsoft would succeed in taking it over, as the transaction faced multiple hurdles, said people familiar with the negotiation.

The people also said multiple parties were interested in acquiring TikTok and the process remained in its preliminary stages. Microsoft and TikTok declined to comment.

Takeover interest comes amid rising scrutiny of TikTok and ByteDance’s data-sharing practices, which US President Donald Trump’s re-election campaign ads have implied amount to Chinese spying on American users.

Mr Trump said on Friday that he was considering “a couple of options” to address TikTok, including a ban. The Financial Times reported this month that the White House had considered placing ByteDance on the “entity list” which would effectively bar it from doing business with US companies.

Separately, the Committee on Foreign Investment in the United States has been reviewing ByteDance’s 2017 purchase of Musical.ly, which paved the way for TikTok’s growth. Steven Mnuchin, Treasury secretary, said on Wednesday he would make a recommendation to Mr Trump by the end of the week.

“The fears about TikTok are more likely to be answered if the company is fully acquired by a non-China-based entity than if ByteDance retains any ownership,” said Erik Gordon, a professor at the University of Michigan’s Ross School of Business. “If ByteDance is completely out, neither Treasury nor Cfius has anything to worry about.”

It was not immediately clear how much TikTok would be worth in a sale, though its value has been estimated in the tens of billions of dollars. ByteDance has been valued as high as $140bn in private share transactions, according to one person familiar with the trades.

Chart showing that TikTok has been downloaded more than 2bn times

Despite its main focus on the business technology markets, Microsoft had built a highly successful consumer operation around its Xbox gaming platform and could use TikTok to push deeper into a younger demographic, according to analysts.

“They want to grow up with a younger audience,” said Brent Thill, an analyst at Jefferies. “They could introduce new services along the way, as they age up.” He said that the high engagement TikTok had achieved with many of its younger users had eaten into their time playing games, making it a natural complementary service for Microsoft to explore.

It was a potential greenfield opportunity for Microsoft as it looks to expand into new markets, added Youssef Squali, an analyst at SunTrust.

A purchase of Tik Tok would be likely to bring an abrupt end to Microsoft’s loose alliance with Facebook, which dates back to when it saw the social media company as an ally in its battle with Google in the search market.

US investors led by General Atlantic and Sequoia Capital had also been discussing a buyout of TikTok in which ByteDance would retain a minority stake. The investors have held discussions with the Treasury about whether the buyout would satisfy US concerns about the app, the FT reported last week.

General Atlantic and Sequoia declined to comment on Friday.

Josh Hawley, a Republican senator from Missouri and frequent critic of TikTok, told the FT this week that a full divestment of the app would represent a “major step forward” but not go far enough to satisfy concerns about personal data collection.

Earlier this week, Kevin Mayer, TikTok’s new chief executive, defended the company, saying it had a “commitment to accountability”. In his first public comments since joining from Disney in June, he said that without TikTok, US advertisers “would again be left with few choices”, adding: “TikTok has become the latest target, but we are not the enemy.” 

Additional reporting by Hannah Murphy and Patrick McGee in San Francisco, and Tim Bradshaw in London

Letter in response to this article:

America’s young voters will decide TikTok’s fate / From Khaw Wei Kang, Shenzhen, China

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