Twitter in talks to rival Microsoft in bid for TikTok

Twitter has had preliminary talks about a potential tie-up with video-sharing app TikTok.

Twitter has had preliminary talks about a potential tie-up with TikTok, the video-sharing app that the Trump administration has declared a national security threat due to its Chinese ownership.

It is unclear whether Twitter will pursue a deal with TikTok, which would face significant challenges. It is believed a deal would involve TikTok’s US operations.

Microsoft has been negotiating for weeks with TikTok’s owner, Beijing-based ByteDance, and is considered the frontrunner for any possible deal.

Twitter is seen as a longshot bidder, given that it is much smaller than Microsoft, would have a harder time paying for the deal — and the software giant is further advanced in negotiations.

Microsoft said on August 2 that it was pursuing a deal, and that chief executive Satya Nadella had discussed the issue with US President Donald Trump.

Microsoft has said it is negotiating to buy TikTok’s operations in the US, Australia, Canada and New Zealand.

Mr Trump said TikTok must find a buyer for its US operations by September 15 or face a US ban. On Thursday, the White House ­issued an executive order that would bar people in the US from transactions with ByteDance.

It isn’t clear what the valuation of TikTok’s US operations would be but estimates run into the tens of billions of dollars, which raises questions about how Twitter would finance a deal. Twitter’s market capitalisation is about $US29bn ($40bn), while Microsoft’s is more than $US1.6 trillion.

Because it is much smaller, Twitter is said to have reasoned that it would be unlikely to face the same level of antitrust scrutiny as Microsoft or other potential bidders.

Microsoft has said it is negotiating to buy TikTok’s operations in the US, Australia, Canada and New Zealand. Picture: Getty Images

Twitter would almost certainly need help from other investors if it were to buy TikTok. The company has far less financial firepower than other major tech players, though it does have high-powered investors such as private equity firm Silver Lake.

Twitter started making a consistent profit in the past couple of years, but reported a $US1.23bn loss in the latest quarter. Twitter reported $US7.8bn in cash and short-term investments as of June, compared with more than $US136bn for Microsoft.

If a deal did come together, it would reshape Twitter. Although Twitter allows users to upload videos, the app’s focus is on short messages of text and images.

Mr Trump is Twitter’s most high-profile user, but he has lately criticised the company for labelling or restricting some of his tweets that the company says ­violated its policies. Such moves have fuelled the President’s claim that Silicon Valley tech firms are biased against him.

Mr Trump’s statements against TikTok have caused concern among potential buyers. When he told reporters aboard Air Force One on July 31 that he planned to ban TikTok, Microsoft and ByteDance were caught off guard and paused their discussions until they had more clarity about the President’s plans.

Mr Trump has also said the US government should receive a “very big proportion” of the sale price, a condition that will further complicate negotiations. It has also stoked public anger in China.

Unlike Microsoft, Twitter doesn’t operate in China, which blocked access to Twitter in 2009.

For Twitter, a deal could help jump-start the social media company, which has struggled to find its footing despite widespread use of its main platform.

Pursuing TikTok would also be something of an about-face for Twitter on video-sharing apps. The company shut down Vine — an app that let users share short, looping videos — in 2016 as a part of a cost-cutting effort.

The Wall Street Journal