US search engine startup, Perplexity AI, has made an interesting proposal to merge with TikTok's US operations, with an offer that will allow US government to control the app.
According to sources familiar with the situation, Perplexity AI aims to create a new company that combines its platform with TikTok's US services. Once this new company will go public, via an initial public offering (IPO), there is an estimated valuation of more than $300 billion and the US government could purchase around 50% of that newly formed entity.
Reuters reported that this development follows earlier apprehensions about security vulnerabilities associated with the application and subsequent moves of the US government to exercise further control.
The new holding company would be named "NewCo" and based in the United States. According to the deal, ByteDance will divest TikTok U to new investors who will retain equity in the new entity. Nevertheless, control of the core recommendation algorithm of TikTok, the blueprint of the platform, will remain within ByteDance. This configuration is believed to satisfy national security concerns while allowing ByteDance to keep hold of an essential asset.
Secondly, Perplexity AI would also present itself for acquisition by the new holding company. The investors in the startup of Perplexity would receive a share of NewCo's equity as part of the deal. This could be a move that strengthens Perplexity's grip on the competitive AI market through leveraging TikTok's massive user base and reach. Success: AI believes Perplexity that a merger instead of full acquisition might work for everyone and stand well.
TikTok Under Trump's Administration
This proposal comes at a time when TikTok's services were shut down in the US for some hours due to security issues. Former President Donald Trump had proposed the ban during his first term but has now sided with TikTok's services to resume operations after recent talks.
He further stated that he is in discussions to buy the app outright. This has raised uncertainty about TikTok's future in the US, with the proposal by Perplexity AI as the most significant development in the plan of sale, just after the White House announced permission for US investors and Oracle to take over.
In the next few weeks, a decision about TikTok's future will be finalized, and experts hint that the more involvement of the US government there is, the more it's likely to be considered.
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