Why China may be OK with TikTok selling to Elon Musk
New York
CNN
—
After previously opposing the idea of a TikTok sale to avert a looming ban, the Chinese government may have found an owner it could live with: Elon Musk.
Chinese officials, who are expected to have some say over whether and how TikTok's US assets could be sold to an American buyer, are discussing a possible option that involves selling at least a portion of the US version of the app to Musk's X, according to reports from Bloomberg and the Wall Street Journal. CNN has not independently confirmed the discussions.
The discussions would mark a stark reversal in China's stance on a TikTok sale just days before the law that could ban the app in the United States is set to go into effect. To avoid a ban, the law would permit TikTok's parent company ByteDance to sell to a US-based owner.
The reports come after the Supreme Court last week indicated that it would uphold the law over national security concerns, despite TikTok's argument that it represents an illegal crackdown on free speech. China's commerce ministry previously said it would "firmly oppose" a forced sale of TikTok, although other would-be buyers put up their hands. TikTok parent company ByteDance has also previously indicated that the app is not for sale.
ByteDance and Musk did not respond to requests for comment about the reports. And TikTok batted them down; spokesperson Michael Hughes told CNN that "we can't be expected to comment on pure fiction."
CNN's Rahel Solomon speaks with Josh Constine, a tech expert and Venture Partner at VC firm SignalFire, about the U.S. Supreme Court hearing arguments on the TikTok ban.
Clipped From Video
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Still, there are logical reasons why Musk, ByteDance and China might all find it in their best interests to facilitate a sale of TikTok's assets to the X owner.
ByteDance may simply want to earn for the US version of TikTok before it loses access to the valuable American market.
For China, selling to Musk could mean placing TikTok in the hands of an ally, someone whose business empire is deeply reliant on the Chinese market and who has the ear of incoming President Trump at a time when China will be looking for leverage in tariff negotiations.
For Musk, acquiring TikTok and preserving Americans' access to the app at the last second after TikTok fought the ban on First Amendment grounds would play directly into the billionaire's (often hypocritical) image of himself as a defender of free speech. It would give him control over an even larger and more influential social media platform than X, which he has already successfully used to boost his own interests, including aiding the reelection of Donald Trump. And Musk already has a team, however small it might be, at X familiar with managing a social media algorithm and ad sales.
We might be hearing rumblings about it now to see how people feel about it.
"My bet is that it's a float by either Musk or the Chinese to see the reaction," James Andrew Lewis, director of the strategic technologies program at the Center for Strategic and International Studies, said in an email to CNN. "The Chinese probably are figuring out where it would fit into a larger deal with Trump, bit I can't see them giving it away for free."
But such a deal could still face real hurdles, including Musk securing the cash to buy an app in a deal that could cost $40 billion to $50 billion, according to Wedbush analyst Dan Ives.
A friend to China
ByteDance is expected to need the Chinese government's sign-off to sell TikTok's US operations because of export restrictions that could prohibit the sale of sensitive technology, such as the app's recommendation algorithm, without a license.
And if the company's legal challenge to the Supreme Court fails, Musk may be seen as the most China-friendly American buyer, given the significant amount of business he does in the country.
China is Tesla's second-largest market; in the third quarter of 2024 alone, Tesla earned $5.6 billion in revenue from China. Tesla's Shanghai Gigafactory, which Musk has praised as building the company's highest quality cars, is also among the company's most productive plants. And the company is also in the process of building a massive battery factory in Shanghai.
Musk has held multiple meetings with Chinese officials in recent years, including a conversation with Chinese Premier Li Qiang in Beijing last April, during which the official praised Tesla as a "successful model" for US-China collaboration. "Tesla is willing to further deepen cooperation with China and achieve more win-win results," Musk told Li during the meeting.
Although Musk has portrayed himself as a crusader for free speech in the United States, he has stayed relatively mute on the topic when it comes to China, which has arrested political rivals to Chinese leader Xi Jinping on an unprecedented scale since Xi took power in 2012.
Musk has also referred to Taiwan as an "integral part of China," infuriating Taiwanese leadership.
"One of the biggest investors in China from an infrastructure standpoint is Tesla, so Musk's relationship within Beijing, outside of Tim Cook from Apple, is probably the strongest of any US business person," Ives told CNN. Still, Ives said China is unlikely to allow the sale of TikTok with its algorithm, which he called the popular app's "key DNA."
US lawmakers say TikTok currently poses a national security risk because its parent company, ByteDance, is headquartered in China.
Aly Song/Reuters
China may also want to use Musk to get to Trump. A TikTok deal could serve as leverage in negotiations with the incoming administration to avert the massive tariffs the president-elect has threatened to impose on goods imported from the country, which could cause major companies manufacture fewer goods there. After donating to Trump's reelection campaign, Musk has become one of his closest advisers and has reportedly joined calls between the incoming president and other world leaders.
And if Trump gives his blessing, the incoming president could also use the deal to claim he kept his promise to save TikTok for Americans. The TikTok ban-or-sale law gives the president the discretion to decide whether a so-called "qualified divestiture" of the app has indeed taken place to allow TikTok to continue operating in the United States.
Musk's "significant financial resources, established business ties in China through Tesla, and prominence in the social media industry via X make him a potential candidate for brokering a deal acceptable to multiple stakeholders," Dimitar Gueorguiev, a Syracuse University associate professor of political science, said in emailed commentary.
For Musk and X, the TikTok acquisition could be a "golden asset pick-up," Ives said. TikTok's 170 million monthly American users would be a big boost to Musk's social media company. And their videos could also provide beneficial training data for Musk's artificial intelligence company, xAI.
Not a surefire deal
A big question overhanging any discussions of a Musk TikTok purchase is likely to be how he'd afford it.
Although Musk is among the richest people in the world, much of his wealth is tied up in shares of Tesla and his other companies.
And after his money-losing acquisition of X, formerly Twitter, more than two years ago, Musk could have a harder time finding financing partners for a TikTok bid, although the short-form video app almost certainly has a more lucrative ad business than X.
Musk's $44 billion purchase of Twitter was always overpriced, and the billionaire's subsequent decisions after the purchase further tanked the social media company's value. That has reportedly left the banks that lent him the money to buy Twitter unable to offload the debt without losing money, leaving them with big stains on their balance sheets.
There are limits to how Musk can use the $170 billion in Tesla shares that he owns outright as collateral for loans, too. Still, banks may be interested in working with Trump's "first buddy" whose other companies are also expected to benefit from his connection to the White House. Musk's net worth has soared since the election.
People gather for a press conference about their opposition to a TikTok ban on Capitol Hill in Washington, DC on March 22, 2023. - The White House was reported on March 15, 2023, to have told the app TikTok that it will be banned in the US if it continues to be owned by the Beijing-based tech firm Bytedance.
Brendan Smialowski/AFP/Getty Images
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Even if Musk managed to buy the app, there's no saying whether TikTok users would stick around under a new owner.
Many frustrated users fled X after Musk's takeover as he changed its recommendation algorithm, did away with the company's trust and safety team and restored previously banned accounts, including White supremacists, leading to an uptick in hate speech and misinformation. Musk himself has also boosted racist conspiracy theories on the app.
Some TikTok users responded to reports of Musk's possible acquisition with excitement, including one user who posted a dance video celebrating the news.
"The idea of TikTok going away is scary. But you know what's scarier? Elon Musk owning it," a user named Omie said in a video Tuesday. "I would rather this app be banned than that mothertrucker own it. I mean, honestly, the idea of this turning into a Twitter is scary."
Another user who goes by Mo said in a video: "I love TikTok, bro, but why does it have to be Elon Musk? He's already running Twitter (in) to the ground." One commenter said on that video, "I rather China have my info than Elon."
And TikTok user Dash Dobrofsky said in a video with the caption "Oh dear god, please no," that Musk buying TikTok "sounds like a terrible idea… This would no doubt make Elon Musk the most powerful man in the world."
Such a user revolt could ultimately undermine the value of the platform for Musk and any investors he'd be able to round up for a TikTok purchase.
