A high-profile bill that aims to dismantle TikTok's U.S. operations is affecting social media stocks.
What Happened: At last check on Thursday:
- Meta Platforms Inc META is up 1.4%
- Snap Inc SNAP, whose app Snapchat presents significant overlap in user base with TikTok, saw its shares rise by 6.1%
- Global X Social Media ETF SOCL is also up by 1.7%.
The bill was already approved by the House of Representatives last month. Since then, it has reportedly been fast-tracked through Congress and lumped into an aid package bill for Ukraine, Israel and Taiwan.
House representatives are scheduled to vote on the package this Saturday. If approved, the legislation would force TikTok's Chinese parent company ByteDance Ltd. to divest and sell its U.S. operations or face a shutdown in U.S. soil, where 170 million people are active users.
Why It Matters: The bill has been highly criticized by influencers and small business owners who depend on the platform to make their living.
TikTok CEO Shou Zi Chew insists that a ban could erase billions of dollars from the U.S. economy and potentially put 300,000 jobs at risk.
Zi Chew is also leading an extensive lobbying campaign against the legislation. ByteDance has poured over $8.7 million into lobbying efforts last year alone, according to OpenSecrets.
ByteDance has not explicitly stated its intentions to sell its U.S. assets under any circumstances.
Recently, China’s Ministry of Commerce indicated that the Chinese government would intervene in any attempt to divest TikTok, requiring the app to abandon its U.S. user base before any sale.
China has the ability to interfere in the company’s sale, as TikTok's content-recommendation algorithms are within the country's export-control list.
The company has said the bill is "an outright ban of TikTok, no matter how much the authors try to disguise it," arguing it runs against First Amendment rights of free speech.
If the bill is signed, it is likely to face aggressive legal action from ByteDance, possibly reaching the Supreme Court for a final definition.
The updated version of the bill allows the company up to one year to secure a buyer, compared to the previous six-month deadline. Incorporating the legislation into the foreign aid package increases its likelihood of passing in the Democrat-controlled Senate, where its prospects as a stand-alone bill were unclear.
President Joe Biden has previously signaled that he'll sign the bill if it reaches his desk. He has also expressed support for the $95 billion foreign aid funding package set to hit the House floor this week
Conversely, former president Donald Trump, who is facing Biden ahead of November's presidential election, has recently said he's against the TikTok bill.
Trump had called for a ban on TikTok during his time in the White House, describing the app as a national security risk, and marking it as liable to hand over user data to the Chinese government.
Trump has revised his stance, now arguing that a ban would simply redirect users to Meta’s Facebook, which he labels as the “enemy of the people.”
Now read: TikTok-Inspired Music Remixes Hit Spotify: A Game Changer for Artists?
Image: Shutterstock
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