TikTok parent ByteDance has special stock owned by the Chinese government. Here’s how the ‘golden shares’ see Beijing wielding influence over the social-media giant.

• In 2021, the Chinese government bought a 1% stake in the main domestic unit of ByteDance, the owner of TikTok.
• The ownership stake came up in recent congressional hearings as US lawmakers consider a TikTok ban.
• Here’s what the so-called Golden Shares are and how Beijing could use them.

During a congressional hearing last week on security concerns related to TikTok, a lawmaker asked whether the Chinese Communist Party has a “golden share” in parent company ByteDance that gives it control of a board seat.

Shou Zi Chew, CEO of TikTok, said that this was not correct and that the Communist Party has no voting rights in ByteDance. But the details are more complicated.

In 2021, a fund backed by the Cyberspace Administration of China, a government regulator and censor, bought a 1% stake in ByteDance’s main Chinese subsidiary for 2 million yuan along with two other state entities, making it one of three directors to be named. Right received. Unit board.

According to the Financial Times, Communist Party official Wu Shougang was appointed to the board. As a CAC official, he once posted on social media, “Fuck the Chinese traitors who preach the so-called ‘human rights and freedom’!!” FT said.

As US lawmakers debate a TikTok ban, here’s what Golden Shares are and how China’s government could use them.

What are golden shares?

Officially known as “special management shares,” according to the Wall Street Journal, these shares were designed in 2013 as a way for the government to loosen control over the business sector without giving it full autonomy.

Stakes are often 1%, but despite their small size, they can still provide a seat on the board and influence over business decisions.

The government uses gold shares instead of more explicit measures to keep its tech sector under control. And in January, CAC bought golden shares in an Alibaba subsidiary to exert more control over content on streaming video unit Youku and web browser UCWeb, the FT said.

How can the Chinese government influence ByteDance?

In addition to TikTok, ByteDance owns several companies, including news aggregator Toutiao and TikTok’s sister app Douyin, which is used in China.

The ByteDance unit that sold the golden shares to the Chinese government has licenses for Toutiao and Douyin to operate under local law. The unit’s charter reveals that Wu, appointed by the government’s board, will oversee “business strategy and investment plans,” any merger deals, how to allocate profits, and a vote on the top three executives and an opinion on their compensation, according to the FT. Is.

The FT said Wu also has the authority to control content at Toutiao and Douyin, the ability to appoint and dismiss the unit’s top censors, and to lead a “content security committee” or name its chair.

What does this mean for Tiktok?

At the same time, Tiktok says that it is different from ByteDance. And ByteDance told Insider that the domestic entity selling the Golden Shares “has no ownership, visibility or input into ByteDance’s global operations.”

But according to the Wall Street Journal, the government’s purchase of the golden shares was partly to tell Beijing what happens to TikTok’s algorithm, which recommends videos to users, namely to prevent its sale or transfer. .

Meanwhile, last week’s hearing did nothing to ease lawmakers’ fears that TikTok is a potential security threat, and ByteDance faces investigations from the FBI and the Justice Department over claims it used TikTok to steal money. Surveyed journalists with

Political sentiment is so skewed against TikTok that Wedbush’s Dan Ives sees a 90% chance it will be banned in the US, unless it goes through an IPO or is bought by a mega-cap tech giant.

Source: markets.businessinsider.com