With a TikTok ban looming, Chinese officials are reportedly mulling whether the app's U.S. operations could be sold to Elon Musk, who already owns social media platform X and is a key ally to President-Elect Donald Trump. TikTok denied the reports. However, stocks of competing social media companies that could benefit from TikTok being banned – including Meta Platforms – fell Tuesday.
Beijing officials are discussing responses to the pending TikTok ban, according to The Wall Street Journal and Bloomberg. The popular short-video app is facing a ban from U.S. app stores on Jan. 19, unless it is sold by its China-based parent company ByteDance. Supreme Court justices appeared to be leaning toward upholding the law that would ban TikTok during a hearing late last week.
Chinese government officials prefer that TikTok remains under the control of ByteDance, Bloomberg reported citing unnamed sources. But officials have begun to discuss "contingency plans," according to Bloomberg.
A deal with one of Trump's most prominent supporters in Musk "holds some appeal" for the Chinese government, Bloomberg reported. Musk could run the business along with X, the former Twitter that Musk acquired in 2022.
The Wall Street Journal, meanwhile, reported early Tuesday that Chinese officials have "internally discussed options including the possibility of allowing a trusted non-Chinese party such as Elon Musk to invest in or take control of TikTok's U.S. operations."
In an emailed comment to IBD, a TikTok spokesperson said the company "cannot be expected to comment on pure fiction."
What Would TikTok Cost For Musk?
Wedbush analysts said Tuesday that the reports are "not a total shock" given the alliance between Musk and Trump.
"We believe in the scenario that ByteDance sold the U.S. operations of TikTok this would be without the algorithm (ByteDance will never sell this key DNA) at a price tag likely in the $40 billion to $50 billion range," Wedbush analysts led by Dan Ives said in a client note.
"This would significantly enhance the value of Twitter/X platform and likely Musk would take outside investments for this potential golden asset pickup. It's also possible that instead of an outright sale this results in a joint partnership with Musk playing a major role and helping avoid a true ban of TikTok in the U.S."
The law that would ban TikTok is set to take effect on Sunday, the day before Trump's inauguration. Signed by President Biden last spring with bipartisan support, the law requires ByteDance to sell TikTok's U.S. operations to another company. If it doesn't, the app will be banned. TikTok challenged the law on First Amendment grounds. It calls the potential ban an "unprecedented censorship" for the more than 170 million Americans who use the app.
The Supreme Court will likely rule this week on TikTok's challenge to the law.
Musk's TikTok Ban Opposition
Meanwhile, Musk opposed the TikTok ban "even though such a ban may benefit the X platform," he said in a post on X last year.
Back when X was Twitter, the company briefly operated Vine, a short-video app that served as a precursor to TikTok. Twitter shut the app down in 2016. After Musk bought Twitter in 2022, he polled users on whether to relaunch Vine and reportedly asked engineers to work on a Vine reboot.
RBC analyst Brad Erickson wrote Tuesday that pairing X and TikTok "would be a better outcome than a purpose-formed entity, where we'd view TikTok as likely lacking some engineering horsepower relative to its competitors."
Stocks To Watch In TikTok Ban
If TikTok is not sold, it will not be allowed in app stores, such as those run by Apple and Google-parent company Alphabet. That would make it impossible for TikTok to add smartphone users or send out updates to existing one.
Users would likely switch their attention over, analysts says, to competing services from Facebook parent company Meta, Snapchat parent Snap or Google's YouTube.
"Without a divestiture, we expect the service (and monetization) to degrade over time, with usage and revenue migrating to competing platforms," Evercore ISI analyst Mark Mahaney wrote to clients Tuesday. "We believe upcoming developments should serve as a positive (though modest) catalyst for Meta and Google, and a potentially material catalyst for Snap."
On the stock market today, Meta stock lost 2.3% to close at 594.25. Shares fell below a former 602.95 buy point, according to MarketSurge. Google stock closed a fraction lower, at 189.66. Snap stock tumbled 6.7% to end the day at 11.34.
