TikTok ban could be a matter of ‘when, not if’ after CEO’s testimony

Instead of allaying the fears of American lawmakers, TikTok Chief Executive Shou Chew’s appearance before Congress last week may have served to hasten calls to ban the social media app from the United States.

That’s the opinion of Wedbush analyst Dan Ives, who said Chew’s testimony and responses to Congressional questioning were a “disaster,” and that is now just a matter of time before the Committee on Foreign Investment in the United States [CFIUS] formally recommendations a ban on TikTok in the U.S. due to widespread concerns about the company sharing users’ data and personal information the Beijing government and the Chinese military.

“All indications from the Beltway indicate a ban of TikTok within the U.S. are likely sealed at this point,” said Ives, who estimated the odds of a ban at “90%-plus in our opinion.”

Multiple U.S. lawmakers have called for ByteDance (BDNCE), TikTok’s owner, to sell the app to an American company, or for a ban on the app being able to be used in the U.S. because of how the company tracks and manages its users’ information. Last, week Chou stressed TikTok’s commitment to its Project Texas plan that has TikTok storing Americans’ information in the United States, and being overseen by American security officials.

However, Ives said that Chou “came off [as] evasive in the eyes of U.S. legislators without concrete answers around the sensitive China data topic.” Because of this, Ives said that the bipartisan bi-partisan legislation that is working its way through Congress “now lays the path for a ban and the final straw that will ultimately break the camel’s back for TikTok.”

Ives estimates it’s a matter of “when, not if” TikTok gets banned in the U.S., and when it does happen, ByteDance will get “a defined timeline” of three to six months to sell or spin off TikTok. Until then, TikTok will face “a very bumpy and tricky path ahead” with its next strategic steps.

Should ByteDance go the route of selling TikTok, Ives said “the price tag will be eye popping” due to its strategic value and platform among consumers. Numerous potential acquirers such as Microsoft (MSFT), Oracle (ORCL) and Apple (AAPL), in addition to a consortium of private equity firms could line up to make a bid for the company.

With regards to the likes of Facebook’s Meta Platforms (META), Snapchat (SNAP) and Google (GOOG), Ives said watching the TikTok hearing “was like eating popcorn [and] watching a good movie as the social media disruption from TikTok will clearly benefit Meta and Snapchat front and center in the eyes of the Street.”

Earlier this month, Citi analyst Ronald Josey said that a ban on TikTok would be “positive catalyst” for other social media companies.