Kevin O’Leary wants to buy TikTok at up to 90% discount. Here’s why

Kevin O’Leary is assembling a syndicate for a prospective TikTok acquisition, with a starting proposal of $20 billion to $30 billion, representing a 90% drop in valuation from the company’s previous investment round.

According to PitchBook statistics, any transaction for the short video-sharing platform will most certainly eliminate the user preference-based algorithms that have helped make it so successful, said O’Leary Ventures Chairman on CNBC’s “Street Signs Asia.”

“It’s the largest entertainment and business network in America as it stands today, so it’s of great interest and great value,” he said in a statement on Friday.

However, it is unlikely that the Chinese government will sell the algorithms. “So what you’re getting is the valuable domestic brand TikTok and 170 million users, with no data,” O’Leary explained.

To turn the platform from “TikTok China to TikTok U.S.A,” a potential acquirer must “re-emulate” those algorithms with U.S. code and serve as a “steward.” Hence the valuation reduction.

Earlier in March, the US House of Representatives approved a bill that would require TikTok owner ByteDance to either divest its major global app or risk an effective ban. However, it could be months before any TikTok-related legislation reaches the Senate floor.

It’s also uncertain whether the Chinese government will allow ByteDance to sell TikTok to a US buyer. The firm has lobbied vigorously against the bill.

Nonetheless, O’Leary believes there is a 50% likelihood of a ban and forced sale of the social media behemoth early next year, following the US presidential election, and he is prepared for the prospect.

Given the consequences for national security, any potential deal would require the White House’s approval. O’Leary stated that he has already discussed the topic with Republican probable presidential nominee Donald Trump and plans to meet with Joe Biden, who is seeking a second term.

The O’Leary Ventures Chairman also stated that he was in talks with additional parties interested in joining the buyout syndicate and that he would begin soliciting sovereign wealth funds in April.

Separately, former US Treasury Secretary Steve Mnuchin has expressed interest in purchasing TikTok.
“This is the most complex deal ever in social media, and I have to build a new algorithm,” O’Leary said in a statement. “It’s a very interesting deal, and I like it.”

TikTok did not immediately respond to a request for comment.