ByteDance to Get About 50% of TikTok US Profit Under Trump Deal

TikTok’s Chinese parent company will likely get about half of the profit from the platform’s US operation even after it sells majority ownership to American investors as part of a deal orchestrated by President Donald Trump, according to people familiar with the matter.

ByteDance Ltd. is expected to receive a licensing fee on all revenue generated from making its algorithm available to the US operating entity as well as a share of the profit in proportion to its equity stake, said the people, asking not to be identified because the terms are confidential. Overall, the Beijing-based parent company will probably get 50% or more of the overall profit of the US operation after its new owners take control, the people said.

ByteDance, TikTok and the White House didn’t respond to requests for comment.

The profit-sharing arrangement is the latest twist in an extraordinary corporate drama that has played out across multiple US administrations. President Joe Biden signed a law requiring ByteDance to relinquish control of TikTok’s US operations to American ownership or be shut down. Since his return to office, Trump has repeatedly pushed back the deadline for a sale as he has negotiated a compromise to keep the service operating — often saying that support on TikTok helped him win the 2024 election.

Last week, Trump spoke by phone with China’s Xi Jinping about the deal, and the US side said the leaders had reached an agreement for the sale. Chinese authorities have declined to confirm that consensus however, and terms of transaction haven’t been nailed down. Vice President JD Vance added to the confusion on Thursday when he said the price tag for the sale would be about $14 billion — far below the $35 billion to $40 billion estimate analysts had expected. Bloomberg's Mandeep Singh reports.

The profit sharing agreement may explain the disconnect. Under the current proposal, TikTok US would pay ByteDance a hefty licensing fee on the revenue it takes in for use of its algorithm, the technology at the heart of its business credited with making the service addictive. ByteDance may get 20% for those rights on incremental revenue, or revenue generated through the algorithm, one of the people said. Under those terms, for example, for example, at $20 billion in revenue, ByteDance may get as much as $4 billion.

On top of that, ByteDance would take roughly 20% of the profit from the remaining revenue, in line with its remaining equity stake. The US-backed consortium, which is likely to include Oracle Corp., Silver Lake Management and Abu Dhabi-based MGX, and existing investors would share the remaining profit. That group is expected to own about 80% of the US business.

That distribution of profits under the new venture illustrates why there’s such a gap between where many analysts have assessed the US business’s value and the price tag floated by the Trump administration.

Ashwin Binwani, who is founder of Alpha Binwani Capital and does not hold ByteDance shares, said the $14 billion proposal “could be the most undervalued tech acquisition of the decade.” He estimated the floated figure reflects a third of TikTok’s true value. “By every major financial metric and peer comparison, this price tag looks dramatically misaligned with reality.”

Vance did say that the purchasers will “ultimately” determine the amount paid. It’s not clear how close ByteDance and the acquiring consortium are to finalizing terms.

The Chinese embassy in Washington responded to Trump’s latest comments by reiterating a previous statement on the matter. The “U.S. side needs to provide an open, fair and non-discriminatory environment for Chinese investors,” it said.

--------

Watch Bloomberg Radio LIVE on YouTube

Weekdays 7am-6pm ET

Follow us on X

Subscribe to our Podcasts:

Bloomberg Daybreak

Bloomberg Surveillance

Bloomberg Intelligence

Balance of Power

Bloomberg Businessweek

Listen on Apple CarPlay and Android Auto with the Bloomberg Business app:

Apple CarPlay

Android Auto

Visit our YouTube channels:

Bloomberg Podcasts

Bloomberg Television

Bloomberg Originals