By Georgia Wells and Cara Lombardo 

Twitter Inc. has had preliminary talks about a potential combination with TikTok, the popular video-sharing app that the Trump administration has declared a national-security threat due to its Chinese ownership, according to people familiar with the matter.

It is unclear whether Twitter will pursue a deal with TikTok, which would face significant challenges. A deal would involve TikTok's U.S. operations, the people said.

Microsoft Corp. has been negotiating for weeks with TikTok's owner, Beijing-based ByteDance Ltd., and is considered the front-runner for any possible deal, according to the people. Twitter is seen as a long-shot bidder, given that it is much smaller than Microsoft and would have a harder time paying for the deal -- and the software giant is further advanced in negotiations.

Microsoft said on Aug. 2 that it was pursuing a deal, and that CEO Satya Nadella had discussed the issue with President Trump. Microsoft said it was negotiating for TikTok's operations in the U.S., Australia, Canada and New Zealand.

President Trump has said that TikTok must find a buyer for its U.S. operations by Sept. 15 or face a ban. On Thursday, the White House issued an executive order that would bar people in the U.S. from transactions with ByteDance.

It is not clear what the valuation of TikTok's U.S. operations would be, but estimates run into the tens of billions of dollars, which raises questions about how Twitter would finance any deal. Twitter's market capitalization is about $29 billion and Microsoft's is more than $1.6 trillion.

Because it is much smaller, Twitter has reasoned that it would be unlikely to face the same level of antitrust scrutiny as Microsoft or other potential bidders, said people familiar with the discussions.

Twitter would almost certainly need help from other investors if it does buy TikTok. The company has far less financial firepower than other major tech players, though it does have high-powered investors such as private-equity firm Silver Lake. Twitter started making a consistent profit in the past couple of years, but reported a $1.23 billion loss in the latest quarter. Twitter reported $7.8 billion in cash and short-term investments as of June, compared with more than $136 billion for Microsoft.

Write to Georgia Wells at Georgia.Wells@wsj.com and Cara Lombardo at cara.lombardo@wsj.com

 

(END) Dow Jones Newswires

August 08, 2020 18:39 ET (22:39 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.
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