TikTok Deal Details Begin to Emerge. Oracle Stock Surges.

The White House is “100% confident” that a deal has been reached to create a new U.S.-backed version of TikTok, a U.S. official said Monday. (ROBYN BECK/AFP via Getty Images)

The long road toward keeping TikTok operating in the U.S. may be coming to an end. On Monday, a senior White House official said that a joint venture would be formed to manage a new U.S. version of the app. The new entity would be majority owned by U.S. investors and have an American majority on the board of directors.

The deal is designed to satisfy a 2024 U.S. law that required U.S. ownership of TikTok for the social media app to continue operating in the U.S.

“All this is going to save TikTok for 170 million American users, make it safe and secure for them,” the official said. “It’s going to save thousands of jobs. It’s going to save thousands of small businesses that depend on the app to promote their businesses.”

The joint venture will be owned, the official said, by “a mixture of U.S. and global firms who are already invested in ByteDance,” TikTok’s Chinese owner. This would be supplemented by new investments from Oracle , private equity firm Silver Lake, and others. A majority of ByteDance’s current investors are Chinese, according to FactSet, so it is unclear what happens to their stakes. ByteDance will own under 20% of the U.S. joint venture, the official said.

Oracle will continue to provide cloud services for the U.S. TikTok, the official said. Shares of Oracle are up 5.2% on the news Monday.

While the official said the White House was “100% confident” that a deal had been reached, the official didn’t comment on the Chinese government’s position. The Chinese Foreign Ministry, the Chinese U.S. embassy and ByteDance didn’t immediately respond to a request for comment.

The key issue in any deal will be the details surrounding TikTok’s industry-leading recommendation engine, the algorithm that picks the next video for users to watch. The White House official said that the new U.S. TikTok joint venture would get a “copy” of the engine, and that Oracle would be responsible for “retraining” it so that it meets U.S. security standards. There will be continued questions as to how user video feeds will be tailored around politics and other issues.

The official said that unlike the deals with U.S. Steel and Intel , the U.S. government won’t be taking a stake in the new U.S. TikTok joint venture.

It also won’t have a seat on the board, as had been reported last week.

The official said that the next step will be the issuance of an executive order to extend the current pause in the enforcement of 2024 law through April 2026. During the pause the White House expects ByteDance to sign off on the framework of the agreement, and it will “allow the investor parties and the company to do all the implementation documents that are needed to get to closing.”

Write to Adam Levine at adam.levine@barrons.com