TikTok parent company ByteDance has reportedly asked the company to prepare for shutting down its operations in the US. Although TikTok is working on divesting its US arm, ByteDance has asked the app's engineers to draw up contingencies should it need to shut down, Reuters reports. The news follows the resignation of TikTok CEO Kevin Mayer earlier this week.
ByteDance has until mid-November to sell off its US operations following the Trump administration's executive order earlier this month. The order threatens to ban the hugely popular short-form video-sharing app in the country on security grounds unless its Chinese parent divests the app to an American company.
While TikTok continues to look out for a buyer, it has also filed a lawsuit challenging the order. Now, the latest report suggests it is preparing for the possibility of a shutdown as well, in case it fails to reach an acquisition deal with an American company by the November deadline.
The company hopes that any shutdown would be temporary, the report cites some anonymous sources as saying. TikTok was recently banned by the Indian government on security grounds. However, ByteDance CEO Zhang Yiming says the company is "moving quickly" to resolve issues in the country, hinting at a possible comeback.
TikTok is home to thousands of "influencers" who have built large followings on the app by making engaging content. A ban would deprive them of the income they receive from ads in their videos. TikTok claims it has about 100 million monthly active users in the US.
TikTok starts to prepare for US shutdown
With an estimated valuation between $10 billion and $50 billion, there aren't many companies that can afford funds to buy TikTok's US operations. There are regulatory concerns as well. However, the app has still garnered interest from some of the biggest American tech firms.
Microsoft, Twitter, Walmart, and Oracle have all shown interest in the app's US operations. ByteDance had also recently reached out to Netflix for a possible acquisition deal but the streaming giant declined the offer. It will now reportedly pick a bidder by this Friday to enter into advanced talks.
However, since TikTok is a global company, buying a part of it is a very complicated deal. Any deal would need approval from both the United States and Chinese governments as well. In view of all these complications, ByteDance has asked TikTok to prepare shutdown contingencies.
A shutdown would also impact TikTok US employees and vendors. ByteDance is drawing up separate plans for compensating them as well. TikTok has already stopped hiring in the US. The company reportedly only hired five percent of the staff it planned to recruit in the country before.
These shutdown preparations are a backup plan, though. TikTok still hopes to be continually operating in the US beyond Trump's November deadline. Perhaps, under a new parent company.
"We are confident that we will reach a resolution that ensures TikTok is here for the long run for the millions of Americans who come to the platform for entertainment, self-expression, and connection," a TikTok spokesman said. "As any responsible company would do, we are simultaneously developing plans to try to ensure that our US employees continue to get paid in any outcome."