A messy state of play for TikTok
A federal bill to force TikTok’s Chinese owner to sell the video app — or have it banned — is moving through Washington with surprising speed, after the House passed it with an overwhelming majority.
Though its fate in the Senate is unclear, anti-China sentiment and pressure on lawmakers from the White House could force the issue. That belies the technical and legal hurdles in selling TikTok, as well as divisions within the U.S. tech community over the proposed legislation.
The bill has scrambled the politics of the Senate. The heads of the chamber’s Intelligence Committee — Mark Warner, Democrat of Virginia, and Marco Rubio, Republican of Florida — support the bill. So do the sometimes progressive John Fetterman, Democrat of Pennsylvania, and the hawkish Ted Cruz, Republican of Texas.
“China bends American companies to its will all the time. It’s long overdue to push back and this bill does exactly that,” Fetterman posted on social media.
Opponents include Republican libertarians like Rand Paul of Kentucky and Mike Lee of Utah as well as mainstream Democrats like Richard Blumenthal of Connecticut.
American tech executives appear divided. An adviser to Alex Karp, Palantir’s C.E.O., called for a campaign against House lawmakers who voted no, joining the likes of the libertarian venture capitalist Keith Rabois.
Other tech leaders privately say that while their companies could benefit from hamstringing a competitor, the bill could open the door to broader regulation of social media in the U.S. and elsewhere. Executives also worry about getting caught in an escalating crossfire between the U.S. and China — what if China requires American companies to divest their operations there?
(Also worth noting: The app lost several billion dollars last year on $20 billion in revenue, according to The Information, presenting a challenge for an already limited universe of potential buyers.)
There are other thorny considerations. As The Times’s David Sanger writes, the legislation doesn’t address a core issue: the fate of the recommendation algorithms that have made TikTok so popular and worry Washington officials. Any divestment of the app would require rewriting that code, given that Beijing is unlikely to allow a sale to include it.
The bill faces speed bumps. The Senate is set to take a two-week recess at the end of the month. Meanwhile, key Democratic leaders — including Chuck Schumer of New York, the majority leader, and Maria Cantwell, the chair of the Commerce Committee — haven’t committed to any sort of timeline.
Even if the bill is signed into law, expect TikTok to challenge it in court, which would take months to sort out.
HERE’S WHAT’S HAPPENING
The former Time Warner C.E.O. Gerald Levin dies at 84. A well-regarded corporate leader and seasoned deal maker, Levin orchestrated the sale of his company to AOL, then the largest merger in history, creating a colossus in tech and media. But the deal proved disastrous, coming to be seen as the worst corporate marriage ever.
Under Armour’s founder is returning as C.E.O. Kevin Plank, who stepped aside in 2019, will take over from Stephanie Linnartz in a bid to revive the struggling sportswear brand’s fortunes. Plank will cede his role as executive chair but will remain on the board; Mohamed El-Erian, the economist and former C.E.O. of Pimco, will become nonexecutive chair.
The embattled electric carmaker Fisker is reportedly considering bankruptcy. The company has hired advisers including the consulting firm FTI and the law firm Davis Polk to work on a potential Chapter 11 filing, according to The Wall Street Journal. Fisker, which went public via a blank-check structure, has suffered from manufacturing complications and slowing demand for electric vehicles.
Deal making hits a national security wall
The fates of British conservative publications and an American industrial icon are facing a common foe: growing resistance in the halls of power to foreign buyers amid national security concerns — a trend that’s increasingly worrying deal makers.
The latest examples involve an Abu Dhabi-backed takeover for the Telegraph newspaper and Spectator magazine in Britain and Nippon Steel’s acquisition of U.S. Steel.
Britain is changing the law to stop the media deal. Rishi Sunak, Britain’s Conservative prime minister, said on Wednesday that his government would move to block state majority-financed deals for British news publications.
The decision is likely to kill a $600 million bid by Jeff Zucker’s RedBird IMI, a joint venture between the American private equity firm RedBird Capital and International Media Investments, a fund controlled by the U.A.E. Abu Dhabi provides about three-quarters of RedBird IMI’s financing.
President Biden is set to raise questions about the steel deal. He isn’t expected to block it, even though the administration has the power to stop foreign acquisitions on national security grounds.
Instead, he will say it needs “serious scrutiny” ahead of a state visit next month by the Japanese prime minister, Fumio Kishida. That’s a polite way of saying he opposes the deal, even though it’s hard to see how Japan is a threat.
Electoral politics hang over both decisions. Sunak needs to call a vote by next January. The Conservative elite and the two media outlets lobbied him to act at a time when he’s trailing in the polls.
The United Steelworkers union opposes the Nippon takeover. Biden and Donald Trump are courting blue collar voters in Pennsylvania, the key swing state where U.S. Steel is based.
Unlike in the TikTok case, the U.S. and Britain are pushing back against allies. Japan is an increasingly close U.S. partner, especially as Washington’s fight with Beijing intensifies. Abu Dhabi is a close Middle Eastern ally of Britain and a growing source of inward investment in other areas, including in national infrastructure.
Deal makers are on alert. The national security implications for cross-border M.&A. were a big topic of discussion at the Tulane Corporate Law Institute, a top M.&A. conference, last week. With the U.A.E. and other Middle Eastern countries turning on the taps to invest in the U.S., expect more scrutiny.
Elon Musk cancels Don Lemon
Elon Musk’s mission to transform X into a must-watch space for newsmakers, influencers and provocateurs has already suffered a costly advertiser exodus. Now, Musk has cut ties with Don Lemon, a former CNN star whom he had courted to join X, after a testy interview.
Musk rejected Lemon’s show on Wednesday ahead of its first episode. Musk and Lemon disagree on why the partnership fizzled, a move that blindsided salespeople at X, The Times reports. But it followed a lengthy and occasionally tense interview that touched on Musk’s drug use, his political views, and how he manages multiple businesses.
The firing could stall Musk’s efforts to crack into live streaming and challenge YouTube. The billionaire also faces huge challenges with his other businesses, including Tesla. The electric vehicle maker’s stock has fallen more than 30 percent this year. A Wells Fargo auto analyst downgraded Tesla on Wednesday, warning that the company may not grow this year.
Musk describes himself as a “free-speech absolutist” and had promised Lemon his “full support” to make a hit show. The company said the abrupt move was a business decision. Musk undermined that position hours later, saying he didn’t care for Lemon’s interview approach. Another wrinkle: Lemon never signed a contract, according to Semafor, which could mean a legal fight over whether X has to pay him.
“Zucker wrote the questions,” Musk posted on X, a reference to Jeff Zucker, Lemon’s former CNN boss. (It’s worth noting that CNN is often used as shorthand for the kind of left-leaning media outlet that the billionaire has derided.)
Lemon questioned Musk’s free-speech credentials. “His commitment to a global town square where all questions can be asked and all ideas can be shared seems not to include questions of him from people like me,” he wrote in an open letter.
The full interview will be broadcast next week on YouTube, Lemon said — and on X.
Activist investing in the cereal aisle
Since leaving finance six years ago, Jason Karp has become a health-brand entrepreneur, founding companies like the chocolate brand Hu that tout their all-natural bona fides.
Now he’s turning activist investor by attacking Kellogg (in which he says he is a shareholder) for using artificial additives despite having pledged to stop, DealBook is first to report. He’s working with Alex Spiro, the Quinn Emanuel lawyer best known for representing Elon Musk.
“Kellogg has unethically and recklessly put short-term profits over customer well-being,” Spiro wrote in a letter to Kellogg’s board last night. The move comes as food giants like Nestlé face pressure from investors and nutrition advocates to make their products healthier.
The letter notes that while Kellogg has dropped artificial additives in its products overseas, they remain in North American iterations of Froot Loops, Baby Shark cereal and others. It calls the chemicals “harmful” to children, and that their “deliberate inclusion” poses a risk to shareholders and the brand’s reputation, opening the company up to “significant legal liability.”
A representative for Kellogg did not respond to a request for comment.
The letter comes after another recent Kellogg controversy, in which the company’s C.E.O., Gary Pilnick, pitched consumers on having cereal for dinner to cope with rising food costs. The comments drew outrage online; Spiro called it a “fiasco.”
The letter jibes with the ethos of Karp’s business. HumanCo, his investment firm (which is advised by the likes of the former PepsiCo C.E.O. Indra Nooyi and the tennis star Venus Williams), backs companies like Against the Grain, a gluten-free pizza brand, Cosmic Bliss, which makes plant-based ice cream.
A fact check: While the letter describes artificial dyes like Red 40, Yellow 6 and Blue 1 as “harmful,” other jurisdictions including the E.U. and Japan also allow them, albeit with label requirements. And studies haven’t definitively found that they harm children.
Spiro and Karp called for an “urgent meeting” with the Kellogg board, to discuss a timeline for ending the use of artificial additives. Otherwise, they added, “We will not hesitate to hold Kellogg’s leadership accountable.”
THE SPEED READ
Deals
Policy
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