• ByteDance would retain a minority stake of less than 20% in TikTok's US operations under a proposed divestment plan, according to a US official.
  • The structure is a key element of ongoing negotiations aimed at averting a potential ban of the app under the "Protecting Americans from Foreign Adversary Controlled Applications Act."
  • While the plan addresses core national security concerns, significant hurdles remain, including potential legal challenges and the need for approval from Chinese regulators.

A proposed resolution to the long-running standoff over TikTok's ownership would see its Beijing-based parent, ByteDance Ltd., hold a significantly diminished stake in the app's US operations, a US official familiar with the matter confirmed. The current framework under discussion would reduce ByteDance's ownership to less than 20%, a move designed to placate lawmakers who have cited national security risks posed by Chinese control of the popular social media platform.

The structure represents a potential path forward as ByteDance races against a legislatively mandated deadline to divest TikTok's US assets. The official, who spoke on condition of anonymity because the talks are private, indicated that while the sub-20% stake is a central component, the broader ownership structure and governance mechanisms are still being negotiated. This would likely involve a consortium of US investors taking majority control, with ByteDance's role becoming purely financial, devoid of operational influence or access to US user data.

Efforts to restructure TikTok's ownership have gained urgency since President Biden signed the divest-or-ban legislation into law earlier this year, giving ByteDance a nine-month window to find a solution, a period that can be extended by 90 days if progress is demonstrated. The company is simultaneously preparing legal challenges to the law on constitutional grounds, a strategy that could delay any forced sale but prolongs the uncertainty for the app's 170 million US users and the businesses that rely on it.

“What institutional investors and regulators are really focused on is structural control and data governance,” said an advisor close to the negotiations. “A minority stake without voting power or board representation is seen as a palatable compromise.”

ByteDance did not immediately respond to a request for comment. The company has consistently argued that it has not and would not share US user data with the Chinese government, pointing to its $1.5 billion Project Texas initiative, which is meant to wall off US data.

For the US government, the primary objective is severing ByteDance's ability to dictate TikTok's operations or potentially be compelled to hand over data to Chinese authorities. A stake below 20% is generally considered a passive, non-controlling interest under US regulatory guidelines, which would significantly mitigate these concerns. However, the deal is far from certain. Any agreement would require a green light from Chinese regulators, who have previously stated their opposition to a forced sale of TikTok's core algorithm technology, a key asset.

An earlier version of this article misstated the potential extension period for the divestment deadline; it is 90 days, not three months.