This week, U.S. President Joe Biden signed legislation that could force ByteDance, the parent of popular short-form content app TikTok, to either divest TikTok or face a ban in the U.S. While the bill could force a potential shutdown of TikTok’s U.S. operations, the company may be gearing up for a legal showdown.
Caught Between a Rock and a Hard Place
A previous report from the Information indicated that ByteDance was considering offloading a majority stake in TikTok’s U.S. operations without the algorithm that powers it. However, the company denied the report, stating that it was not considering a sale.
U.S. lawmakers overwhelmingly passed the bill to force a ban or sale of TikTok, citing potential threats to national security from the app, which has amassed nearly 170 million users in the U.S. Nevertheless, TikTok has repeatedly maintained that it does not share data of its U.S. users with the Chinese government.
While potential suitors for TikTok have been lining up for quite some time now, Chinese authorities have indicated in the past that they will not allow a forced sale of TikTok. ByteDance now has 270 days (until January 19, 2025) to divest TikTok’s U.S. operations or face a ban. Meanwhile, Shou Zi Chew, the CEO of TikTok, has clarified that the company is gearing up for a legal showdown and planning to challenge the restrictions.
Tit-for-Tat
Moreover, a report from the South China Morning Post indicated that ByteDance may be unwilling to sell TikTok to an American buyer if a legal challenge fails to yield results. Meanwhile, similar actions based on national security concerns are unfolding in China as well. Recently, the country ordered Apple (NASDAQ:AAPL) to remove Meta’s (NASDAQ:META) WhatsApp and Threads apps from its App Store in China.
Which Social Media Stock Is Best?
The continued troubles at TikTok could present potential opportunities for market share gains for top social-media names such as Meta, Spotify (NYSE:SPOT), and Google’s (NASDAQ:GOOG) (NASDAQ:GOOGL) YouTube. While all of these names have delivered robust share price returns over the past year, the TipRanks Stock Comparison tool indicates the highest potential upside of 20.3% in Meta stock over the coming periods.
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