Experts are raising doubts over Twitter’s ability to put together financing for a potential deal, so a possible combination is also being discussed.
Twitter Inc has approached TikTok’s Chinese owner ByteDance to express interest in acquiring the US operations of the video-sharing app.
Experts are raising doubts over Twitter’s ability to put together financing for a potential deal, so a possible combination is also being discussed, the Wall Street Journal reported on Saturday.
It’s far from certain that Twitter would be able to outbid Microsoft Corp and complete such a transformative deal in the 45 days that US President Donald Trump has given ByteDance to agree to a sale, sources told Reuters on Saturday.
Twitter’s potential deal
Twitter has a market capitalisation of close to $30 billion, almost as much as the valuation of TikTok’s assets to be divested, and would need to raise additional capital to fund the deal, according to the sources.
“Twitter will have a hard time putting together enough financing to acquire even the US operations of TikTok. It doesn’t have enough borrowing capacity”, said Erik Gordon, a professor at the University of Michigan.
“If it (Twitter) tries to put together an investor group, the terms will be tough. Twitter’s own shareholders might prefer that management focus on its existing business”, he added.
One of Twitter’s shareholders, private equity firm Silver Lake, is interested in helping fund a potential deal, one of the sources added.
Twitter has also privately made a case that its bid would face less regulatory scrutiny than Microsoft’s, and will not face any pressure from China given that it is not active in that country, the sources said.
As a smaller company, Twitter would have a long-shot bid for TikTok, but the social media platform believes it would come under less antitrust scrutiny than larger corporations such as Microsoft, the WSJ said, citing people familiar with the talks.
Twitter, however, would likely need the support of other investors to complete the combination.
While Twitter does allow for the sharing of videos, most posts contain short text messages and photos or GIFs.
In 2012 Twitter acquired the platform Vine, which allowed users to share short videos, but shut down the service in 2016.
TikTok, ByteDance and Twitter declined to comment.
Escalating tensions
TikTok has come under fire from US lawmakers over national security concerns surrounding data collection.
Earlier this week, Trump unveiled bans on US transactions with the China-based owners of messaging app WeChat and TikTok, escalating tensions between the two countries.
Trump said this week he would support Microsoft’s efforts to buy TikTok’s US operations if the US government got a “substantial portion” of the proceeds. He nevertheless said he will ban the popular app on September 15.
Microsoft said on Sunday it was aiming to conclude negotiations for a deal by mid-September.
Microsoft
In an executive order, Trump gave Americans 45 days to stop doing business with the platforms, effectively setting a deadline for a sale of TikTok by its Chinese parent firm ByteDance.
He has also demanded that a significant portion of the sale go to the US Treasury.
Microsoft has been the primary suitor for TikTok, saying it was in talks to buy the company’s US, Canada, Australia and New Zealand operations.
The Financial Times reported Thursday that Microsoft has expanded negotiations and was now after the app’s entire global operations.
