After five years of congressional hearings, executive orders, Supreme Court rulings, and enough geopolitical drama to fill a season of prestige television, TikTok finally has a deal. ByteDance signed binding agreements on December 18 to spin off its U.S. operations into a new joint venture majority-owned by American investors, with Oracle, Silver Lake, and Abu Dhabi’s MGX each taking 15% stakes.
The deal is expected to close on January 22, 2026. TikTok CEO Shou Chew told employees in an internal memo that the new entity, formally named TikTok USDS Joint Venture LLC, will operate as an independent company with authority over U.S. data protection, algorithm security, content moderation, and software assurance.
Sounds clean. It isn’t.
The Ownership Math Doesn’t Add Up to a Clean Break
Here’s the structure that’s supposed to satisfy the Protecting Americans from Foreign Adversary Controlled Applications Act: 50% of the new entity goes to “new” investors, with Oracle, Silver Lake, and MGX splitting 45% among themselves and another 5% distributed to additional partners. Another 30.1% will be held by affiliates of existing ByteDance investors. And ByteDance itself retains 19.9%.
Do that math quickly and you’ll notice the problem. The 30.1% held by “affiliates of existing ByteDance investors” includes major U.S. venture capital firms like General Atlantic and Susquehanna that already own pieces of ByteDance. Combined with ByteDance’s retained 19.9%, roughly half of the company’s equity interest remains connected to the same capital pools as before, even if voting rights and governance shift to the U.S. consortium.
Jim Secreto, a former Treasury official who worked on TikTok policy during the Biden administration, didn’t mince words. “The law requires a clean break from ByteDance. This structure doesn’t meet that standard,” he said. “It looks more like a franchise deal that leaves TikTok’s core technology in China than a true divestment.”
The Algorithm Question Remains Unanswered
TikTok’s recommendation algorithm is the secret sauce that made a lip-syncing app into a cultural phenomenon reaching 170 million Americans. It’s also the source of national security concerns, with U.S. officials worried that Beijing could force ByteDance to manipulate what content Americans see.
Under the deal, ByteDance will license its AI recommendation technology to the new U.S. entity. The American company will then use that licensed algorithm to “retrain” a new system on U.S. data secured by Oracle. Oracle will continuously monitor how content gets pushed to users.
But here’s what remains unclear: Is the algorithm being transferred, licensed, or still fundamentally controlled from China with Oracle merely providing oversight? Rush Doshi, who served on the National Security Council under Biden, noted the ambiguity. Chinese media reports from September suggested ByteDance would continue to play a major operational role, with a separate U.S. TikTok entity receiving revenue from the joint venture.
The ban-or-sale law explicitly prohibits “any cooperation with respect to the operation of a content recommendation algorithm” between ByteDance and a new American ownership group. A licensing arrangement that requires ongoing ByteDance involvement might not pass legal muster.
The $14 Billion Valuation Is a Fire Sale
Vice President JD Vance said in September that the new U.S. company would be valued at around $14 billion. Analysts had estimated TikTok’s U.S. operations were worth closer to $50 billion. ByteDance overall has been valued at $330 billion.
That $14 billion figure represents either a massive discount driven by regulatory pressure or a reflection of how much value actually transfers when you strip away the ByteDance technology stack. Either interpretation should give investors pause about what they’re actually buying.
Larry Ellison’s Big Win
Oracle shares jumped more than 5% in after-hours trading following the announcement. For Larry Ellison, whose close relationship with President Trump has been well documented, this represents a significant expansion of Oracle’s existing TikTok partnership.
Oracle has been TikTok’s cloud partner since 2022 under a previous arrangement called Project Texas, which was designed to address data security concerns by storing U.S. user data domestically. That earlier deal was ultimately rejected by the U.S. government as insufficient. Now Oracle returns in a bigger role as the “trusted security partner” responsible for auditing and compliance.
The irony isn’t lost on critics. The same basic framework that regulators rejected is now being presented as the solution, just with a higher price tag and more American investors in the consortium.
What Happens Next
The deal still requires Chinese regulatory approval, which hasn’t been granted. Beijing has historically been protective of algorithm exports, viewing recommendation systems as strategic technology assets. Whether China will actually let ByteDance transfer or license its crown jewel technology remains uncertain.
A seven-member board with a majority of American directors will oversee the new entity. ByteDance gets to appoint one board member. Trump is expected to sign an executive order stating that the deal constitutes a qualified divestiture under the law, with another 120-day enforcement delay to complete paperwork and regulatory approvals.
Representative John Moolenaar, who chairs the House Select Committee on China, has already announced plans to call the leadership of the new TikTok entity for congressional hearings in 2026. The scrutiny isn’t ending; it’s just entering a new phase.
For the 170 million Americans who use TikTok, the app will keep working. For investors betting on Oracle’s expanded role in AI infrastructure, there’s potential upside. But for anyone who thought this deal would definitively resolve national security concerns about Chinese influence over American social media, the fine print tells a different story.
This isn’t a divestment. It’s a restructuring with American investors and Oracle providing cover while ByteDance maintains significant economic interest and technological involvement. Call it what you want, but don’t call it a clean break.
