The U.S. Government is reviewing Oracle’s “trusted tech partnership” with controversial and Chinese-owned short video app TikTok, and could render a decision on whether to approve the deal as early as Tuesday evening or early Wednesday, FOX Business has learned.
Shares of Oracle are hovering near a record high and have gained 15% this year.
The Treasury Department’s Committee On Foreign Investment in the U.S., also known as CFIUS, is meeting with officials from TikTok’s parent, the Beijing-based ByteDance this afternoon about whether the deal with Oracle meets national security standards, according to people with direct knowledge of the matter.
Tiktok, an app which is popular with young people and media influencers, took on geopolitical importance when President Trump in the summer said that its user data is being siphoned by the Chinese government for surveillance purposes and he would ban the app in the U.S. without a sale to an American company.
For nearly six weeks, Microsoft and Oracle proposed different approaches for that sale with the Chinese government, further complicating matters with newly announced controls on data sharing with foreign companies.
With that, Microsoft’s plan to buy TikTok and completely secure it in its cloud fell through and Oracle came up with a plan in which it essentially created a joint venture with a group of U.S. investors to license Tiktok's app from its Chinese owners, while Bytedance maintains ownership of the app's all-important algorithm and the platform.
The Oracle approach is seen as controversial by some members of the Trump administration because it didn’t fulfill the President’s initial standard that any deal for TikTok's U.S. operations maintain no Chinese involvement.
However, other administration officials such as Treasury Secretary Steve Mnuchin, who chairs CFIUS, are said to favor the Oracle approach because it's an expedient solution to a politically thorny problem during an election year of banning an app that's popular with tens of millions of Americans.
With that, people at Oracle are growing increasingly confident that CFIUS will approve the deal with an announcement coming imminently, according to sources with direct knowledge of the matter.
An Oracle spokesperson had no comment. The White House had no immediate comment.
Among the many oddities of the deal is it's unclear if there will be a purchase price. Oracle and its investor group will be paying some amount of money, but only as a licensing fee that will be delivered to Bytedance.
Microsoft in its initial dealings with TikTok was willing to pay as much as $20 billion or more for complete control of the app--so-called "end-to-end" control that would safeguard the user data from any possibility that the Chinese could steal it for surveillance purposes
Oracle officials believe that even though they don’t own the product outright the deal will meet national security concerns because they will control the app and, because it’s in their cloud, they can secure it from any Chinese influence.
However, one reason why Microsoft demanded outright ownership of its app and algorithms is because it feared that without such end-to-end control of the product, the app would still be susceptible to Chinese spying. Because Microsoft is a major contractor with the U.S. Defense Department such arrangements with the U.S. government could be compromised, these people add.
While Mnuchin is said to be in favor of the Oracle approach, U.S. Secretary of State Mike Pompeo is said to have harbored some reservations and could scuttle the deal at the last moment, according to people with knowledge of the matter.
However, the final decision will likely fall to President Trump who has close ties to Oracle CEO Larry Ellison, a major Trump fundraiser.
Trump, on his way to Philadelphia Tuesday, praised Ellison a longtime friend and political supporter.
Other major investors in Bytedance, investment firms General Atlantic and Sequoia Capital, have close ties to the national GOP.
Bill Ford of General Atlantic and Doug Leone of Sequoia are two of the top Republican in the Silicon Valley investment ecosystem.
Also helping Oracle's case is the argument by Mnuchin and others inside the White House that the Oracle deal is a way to sidestep any political issues involving a ban of a popular app that has become a cultural touchstone for tens of millions of young Americans.