The Trump Administration Is Set to Pocket $10 Billion From the TikTok Deal
Miriam Gottfried | Amrith Ramkumar
Summary
The Trump administration is set to receive a roughly $10 billion fee from investors — including Oracle, Silver Lake, and Abu Dhabi's MGX — as payment for brokering the deal that transferred control of TikTok's U.S. business from Chinese parent company ByteDance to a majority American-owned entity. Historians described the payment as nearly unprecedented for a government facilitating a corporate transaction, dwarfing the typical fees earned by investment banks, which usually take less than 1% of a deal's total value.
The payment is part of the agreement through which investors friendly with the administration gained control of TikTok’s U.S. operations from Chinese parent ByteDance, people familiar with the matter said. It comes in addition to the investments made to create a new entity to run the app in the U.S.
The investors include cloud-computing company Oracle ORCL -2.54%decrease; red down pointing triangle, private-equity firm Silver Lake and Abu Dhabi investor MGX. They and other backers paid the Treasury Department about $2.5 billion when the deal closed in January and are set to make several additional payments until hitting the $10 billion total, the people said.
When announcing the framework for the TikTok deal in September, Trump said, “It hasn’t been fully negotiated, but we’ll get something,” adding that the size of the deal and money and effort put in by the government justify compensation. He had previously said, “The United States is getting a tremendous fee-plus—I call it a fee-plus—just for making the deal and I don’t want to throw that out the window.”
The Wall Street Journal previously reported that the administration was expected to get a multibillion-dollar fee.
The $10 billion payment would be nearly unprecedented for a government helping arrange a transaction, historians have said. Vice President JD Vance previously said the new TikTok entity running the U.S. operations is valued at about $14 billion in the deal, which some tech analysts have said dramatically undervalues the company.
As part of the agreement, the U.S. entity has to share profits with ByteDance, which licensed its popular algorithm to the new venture so it could be fully trained on Americans and still owns nearly 20%.
Investment bankers advising on a typical deal receive fees of less than 1% of the transaction value, and the percentage generally gets smaller as the deal size increases. Bank of America is in line to make some $130 million for advising railroad operator Norfolk Southern on its $71.5 billion sale to Union Pacific, one of the largest fees on record for a single bank on a deal.
Administration officials have said the fee is justified given Trump’s role in saving TikTok in the U.S. and navigating negotiations with China to get the deal done while addressing the security concerns of lawmakers.
Trump arranged the deal to comply with a law forcing TikTok U.S. to reduce ByteDance’s ownership stake or cease operations. Many lawmakers worried about security risks associated with a Chinese company controlling an app with so much personal data on Americans, triggering a saga that goes back to Trump’s first term.
The TikTok fee extracted from private-sector investors is the administration’s latest transaction involving the nation’s largest businesses. Trump took a nearly 10% stake in semiconductor company Intel and has agreed to take a chunk of chip sales to China from Nvidia in exchange for granting export licenses. The administration has also taken equity stakes in other companies and has a say in the operations of U.S. Steel following a “golden share” agreement with Japan’s Nippon Steel in its takeover.
