According to recent reports, Elon Musk, the CEO of Tesla Inc., may see his business expand even further.
Chinese officials have discussed whether to allow Musk to invest in or take over TikTok’s activities in the United States, according to reports from the Wall Street Journal and Bloomberg News. In the midst of geopolitical tensions surrounding the well-known app, TikTok confronts the possibility of a U.S. ban that would go into force on January 19.
It was unclear, according to the Wall Street Journal report, if those Chinese officials had discussed the possibility of a Musk intervention with Beijing’s top leaders. According to Bloomberg, China still prefers to challenge the prohibition.
“There is a close relationship between Musk and Beijing [and Chinese leader] Xi Jinping.”Ives Daniel, Wedbush
The investor communications team at Tesla did not immediately respond to BourseWatch’s request for comment.
What to anticipate in the event that TikTok gets outlawed in the United States.
Musk would see an increase in his power in the social media space as well as in the larger American consciousness if the notion were to succeed. According to the Wall Street Journal, he paid $44 billion in 2022 to acquire Twitter, which is now known as X, despite the fact that the service has had trouble retaining advertising.
“This would significantly enhance the value of Twitter/X platform and likely Musk would take outside investments for this potential golden asset pickup,” Wedbush analyst Daniel Ives wrote if Musk were to join TikTok. Additionally, Musk has a strong interest in artificial intelligence, which he uses in all of his businesses, including X and Tesla.
If ByteDance, the parent company of TikTok, were to unload its U.S. division, it is unlikely that it would sell its proprietary algorithm. Ives believes that TikTok’s recommendation system is its “key DNA.” According to him, any sale might fetch between $40 billion and $50 billion.
With a $432 billion net worth, Musk is the richest person on the Bloomberg Billionaires Index, but he pulled in financial partners for the Twitter deal, and Ives believes he will do so again if he decides to participate in a TikTok acquisition.
“Given the strong and growing alliance between [President-elect Donald] Trump and Musk this is not a total shock route as behind the scenes the Trump White House is looking at alternatives if the Supreme Court upholds the ban,” Ives stated. “In addition, Beijing [and Chinese leader] Xi Jinping [have] a strong relationship with Musk so there would be added comfort in this deal/potential partnership to avoid a TikTok ban in our view.”
According to reports, Musk contributed over $200 million to Trump’s November campaign, not counting the value of his regular X postings endorsing Trump or vehemently opposing Democratic contender for vice president Kamala Harris.
The new extragovernmental advisory commission on efficiency, known as “DOGE,” was appointed by Trump along with entrepreneur and former Republican presidential candidate Vivek Ramaswamy. Musk recently acknowledged that the commission was unlikely to find the trillions of dollars in savings that had been promised.
For this reason, Robert Kaminsky, a policy analyst with Capital Alpha Partners, believes Musk could be hesitant to participate in a TikTok purchase. “The optics are not great because it would look self-serving,” he wrote in an email. “Elon’s criticisms of the political elite and his own stance with the Department of Government Efficiency program would be compromised. He’s the contented fighter who gives his time without getting paid.
Whether a hypothetical transaction would pass regulatory muster is another issue.
According to Kaminsky, “the market definition is where antitrust analysis begins.” Are X and TikTok rivals in the same market? Both arguments for and against this are persuasive. A finance buyer or a tech business that does not operate a significant international social media platform would be a better deal from an antitrust standpoint.
Analysts have suggested that other platforms and services, including as Snap Inc.’s (SNAP) Snapchat and Meta Platforms Inc.’s (META) Reels, would profit from a ban on TikTok in the United States while Wall Street awaits the Supreme Court’s ruling on the app. As investors consider if TikTok’s demise is now less imminent, Snap’s stock has partly rebounded on that notion, but it is currently down 5.9% in morning trading on Tuesday. The shares of Meta is down 2.8%.
Don’t miss the Supreme Court hearing on the TikTok ban. If the app dies, its $10 billion in ad revenue might go to these places.
What impact may a potential transaction have on Tesla’s stock? For comparison, it fell 34% between Musk’s announcement that he intended to purchase Twitter and the actual completion of the acquisition in late October 2022. Tuesday saw a little increase in Tesla’s stock price.
