TikTok could a better fit for Twitter rather than Microsoft but it is a bitter pill to swallow
TikTok could be a better fit for Twitter rather than Microsoft but it is a bitter pill to swallow and cannot compete with cash-rich Microsoft.
The Chinese short-video sharing app, which has become a global sensation among teens, has close to 800 million monthly active users and a valuation of $50 billion but Twitter’s market capitalisation is close to $30 billion and they would need to raise additional funds to buy it and it has to be done by September 15.
TikTok’s valuation for operations only in the US is put at under $30 billion.
Twitter does not have enough borrowing capacity and will have a tough time to acquire enough financing.
The US President Donald Trump has given ByteDance, the parent company of TikTok, to agree to a sale due to mounting concerns over privacy.
TikTok is now countering Trump’s US ban with the threat of legal action to ensure the rule of law is not discarded.
Only Microsoft has so far publically confirmed about the Twitter bid but market reports said that Twitter also has held talks with TikTok.
Microsoft said in a blog post on August 2 that the two companies have provided notice of their intent to explore a preliminary proposal that would involve a purchase of the TikTok service in the United States, Canada, Australia, and New Zealand and would result in Microsoft owning and operating TikTok in these markets.
Microsoft may invite other American investors to participate on a minority basis in this purchase.
As of August 7, Microsoft’s market capitalisation stands at more than $1.6 trillion.
If the TikTok deal needs to be done before September 15, then only Microsoft has the power and not Twitter.
Microsoft co-founder Bill Gates has told Wired that the company’s potential TikTok deal as a “poisoned chalice”.
“Being big in the social media business is no simple game, like the encryption issue but having Trump kill off the only competitor, it’s pretty bizarre. I agree that the principle this is proceeding on is singly strange. The cut thing, that’s doubly strange. Anyway, Microsoft will have to deal with all of that,” he said.