TikTok logoSource: TikTok

What you need to know

  • ByteDance is asking TikTok engineers to prepare for a ban in the United States.
  • The company is also preparing compensation for United States employees.
  • Such a plan will only be necessary if a sale of U.S. operations falls through.

ByteDance, the company behind TikTok, is making contingency plans in case it needs to shut down operations in the United States.

Reported by Reuters, the company has told engineers of the app to prepare for a shutdown of U.S. operations, even as the app is rumored to be close to a sale to companies like Microsoft, Walmart, and Oracle. Bytedance may be choosing to sell the U.S. operations of its app to one of the companies as early as Friday.

ByteDance has been ordered by President Donald Trump to divest TikTok in the United States, amid security concerns over the personal data it handles. Microsoft Corp and Oracle Corp are among U.S. companies vying to acquire the assets of TikTok, which claims about 100 million monthly active users in the U.S. ByteDance is expected to pick a bidder to enter into exclusive talks as early as Friday, according to the sources.

According to the report, such a sale would have to be approved by both the United States and Chinese government, so ByteDance is preparing for the case in which one or both countries block the sale.

A sale would have to be greenlighted by both the United States and Chinese governments. The shutdown contingencies are also aimed at preparing TikTok's global operations for the possibility that one of the two countries blocks any deal, the sources said. ByteDance told TikTok engineers in a memo this week to draw up plans for shutting down the app in the United States, the sources said.

As far as its employees in the United States, ByteDance is also preparing to compensate those affected by a shutdown if it does occur. This seems to be the worst-case scenario for the company, who plans to reach a deal in order to avoid shuttering operations.

ByteDance is also making separate plans for TikTok U.S. employees and vendors to be compensated in the event of a shutdown, one of the sources added. TikTok has already implemented a hiring freeze in the U.S. for most open positions because of the uncertainty, bringing in only 5% of the staff it planned to recruit, according to the source. ByteDance views the shutdown preparations as a back-up plan, and is working toward a deal that would keep TikTok operating in the United States without interruption, the sources said.

A spokesperson for TikTok says that the company is currently working hard to prepare for either outcome.

"We are confident that we will reach a resolution that ensures TikTok is here for the long run for the millions of Americans who come to the platform for entertainment, self-expression, and connection," a TikTok spokesman said in a statement. "As any responsible company would do, we are simultaneously developing plans to try to ensure that our U.S. employees continue to get paid in any outcome."

Sources close to the situation asked to remain anonymous. ByteDance did not respond to Reuters' request for comment.