ByteDance Ltd., the Chinese parent company of TikTok, is expected to retain as much as half of the profits generated from the platform’s U.S. operations even after it sells majority ownership to American investors under a deal advanced by President Donald Trump.
According to people familiar with the negotiations, ByteDance will receive a licensing fee on revenue earned through the use of its algorithm as well as a profit share in line with its remaining equity stake.
The arrangement could see the Beijing-based company capturing 50 percent or more of overall profits once the U.S.-backed consortium assumes control.
Under the proposed structure, TikTok U.S. will pay ByteDance a fee of about 20 percent on incremental revenue linked to the algorithm, widely regarded as the core technology driving the platform’s success.
In addition, ByteDance would collect roughly 20 percent of profits from the remaining revenue in line with its equity interest, leaving the consortium — expected to include Oracle Corp., Silver Lake Management and Abu Dhabi-based MGX — to share the balance.
The arrangement sheds light on the significant gap between TikTok’s earlier market valuations of $35 billion to $40 billion and the $14 billion price tag cited by Vice President JD Vance last week.
Analysts argue that the proposed valuation is far below TikTok’s true market worth. Ashwin Binwani, founder of Alpha Binwani Capital, described the transaction as potentially “the most undervalued tech acquisition of the decade.”
Despite Trump’s confirmation that he discussed the deal with Chinese President Xi Jinping and secured approval, Beijing has not publicly confirmed its position.
The Chinese embassy in Washington reiterated that the U.S. must provide “an open, fair and non-discriminatory environment for Chinese investors.”
The profit-sharing arrangement also raises questions about whether the divestment meets the national security objectives of the 2024 law mandating ByteDance’s relinquishment of control or risk of a U.S. ban.
Lawmakers have vowed to scrutinize the deal closely, particularly the extent to which ByteDance will continue to benefit from the platform’s U.S. business.
The agreement, which faces a 120-day deadline for closure following Trump’s latest executive order, remains subject to final terms and ministerial consent.
For now, the structure underscores ByteDance’s enduring influence over TikTok U.S., despite the push to reframe it as a majority American-owned entity.