Perplexity AI revises its TikTok U.S. merger plan, offering a bold proposal that includes U.S. government ownership, to balance investor interests and address national security concerns.
In Short
- Perplexity AI proposes merging with TikTok U.S. to form a new company
- The U.S. government could own up to 50 per cent after the company’s IPO
- ByteDance would keep some ownership while excluding TikTok’s core algorithm
Perplexity AI has made some big changes to its merger proposal for TikTok’s parent company, ByteDance. In its updated plan, Perplexity AI has suggested a deal where the U.S. government could end up owning 50 per cent of the new company, combining Perplexity AI and TikTok U.S. As reported by CNBC, this ownership would only happen after the new company goes public.
The new entity, which is being called NewCo, would bring TikTok U.S. and Perplexity AI together. However, TikTok’s famous recommendation algorithm wouldn’t be part of the deal. Instead, ByteDance would let its investors trade their stakes in TikTok U.S. for shares in the new company. Perplexity AI would do the same with its investors. The money to fund this deal would come from outside investors, who would also provide extra cash to pay a one-time dividend to ByteDance’s investors and help the new company grow.
Perplexity AI has had a massive rise over the past year. At the start of 2024, the company was valued at around $500 million. By the end of the year, that number had jumped to $9 billion. The generative AI boom played a big role in this growth, as more investors saw the potential of AI search tools as a serious challenge to Google. That said, Perplexity hasn’t had a smooth ride. The company has faced some criticism over claims of plagiarism, which has put it under the spotlight for the wrong reasons at times.
The idea behind the merger is to create a stronger, combined entity that benefits both sides. ByteDance would still hold on to a stake in TikTok U.S. without fully selling it, and Perplexity AI would gain access to TikTok’s massive video platform. This would be a big boost to Perplexity’s ambitions. What makes this deal stand out is the part where the U.S. government could own half of NewCo after it goes public. Perplexity believes this could help address national security concerns that have surrounded TikTok for years.
ByteDance has always made it clear it doesn’t want to sell TikTok U.S., but Perplexity’s pitch is different because it’s framed as a merger rather than a sale. This could make the idea more appealing to ByteDance.
Meanwhile, President Donald Trump’s administration has been heavily involved in TikTok’s uncertain future. TikTok has temporarily avoided being banned in the U.S., but Trump has hinted at plans to bring in American stakeholders and possibly give the government a stake in the company. With other players like Microsoft, Oracle, and Elon Musk reportedly interested in TikTok, the next few weeks could be critical. A final decision on the matter is expected soon.
Published by: Aman Rashid