The Trump administration said it is close to a deal that would allow TikTok to keep operating in the U.S. under a new ownership group. The deal could stabilize a top competitor to Meta Platforms' social media empire — but it might still offer some upside for Meta stock, an analyst said Wednesday.
U.S. government officials have yet to release more details on the agreement. The deal could see TikTok's U.S. operations come under control of an investor group that includes Oracle, Silver Lake and Andreessen Horowitz, according to the Wall Street Journal . President Donald Trump said Monday that he will be speaking with Chinese President Xi Jinping later this week. He also told reporters Tuesday that "we have a deal on TikTok."
TikTok's 170 million U.S. users would need to shift to a new app, according to the Wall Street Journal report. TikTok engineers would then build a content-recommendation algorithm for the app using technology licensed from TikTok's parent ByteDance, per the report. On Tuesday, Trump extended the enforcement deadline for a 2024 law banning TikTok unless it's sold by its Chinese parent company, ByteDance.
With the deal not yet finalized, "questions abound" for the broader social media landscape, Bernstein analyst Mark Shmulik said in a client note Wednesday.
"Will the new algorithm work just as well as the previous iteration?" Shmulik wrote. "Will TikTok be able to port over years of customer behavior including followed accounts, posts, videos, searches, and, of course, a personalized algorithm?"
TikTok Ban: Why Meta Stock Could Benefit From 'New Coke' Risk
TikTok faces a risk that Shmulik compared to "New Coke" if it does need to launch a new U.S. app.
"We think there's certainly potential to see increased churn even if the new app is identical to the original — users may conclude it just 'feels' different," Shmulik wrote. "In the event where the new app really requires the users to rebuild their behavior, the likelihood of mass migration is certainly higher."
That would make Meta a "relative winner," in Shmulik's view. He pointed to estimates from Meta's legal team that about 42% of TikTok users went to either Facebook or Instagram when TikTok went dark in the U.S. in January. About 14% of users flocked to YouTube, which is owned by Google parent Alphabet. Snapchat, which is owned by Snap, captured 2% of TikTok's displaced users, according to Meta's calculations. Meta presented the numbers in a trial earlier this year disputing the FTC's claims that it is a monopoly.
In any event, TikTok was only offline in the U.S. for a day before Trump signed an executive order delaying enforcement of the TikTok ban. He has delayed the law's enforcement three more times since then.
