Montana has become the first U.S. state to ban the popular short video app TikTok, as Republican Governor Greg Gianforte signed the bill into law on Wednesday after the state’s legislature passed it last month. The ban will become effective on January 1, 2024, but could be delayed as ByteDance-owned TikTok is expected to pursue a legal fight. If the ban is upheld, competitors Meta Platforms (META) and Snap (SNAP) could see gains.
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Montana Bans TikTok
“To protect Montanans’ personal and private data from the Chinese Communist Party, I have banned TikTok in Montana,” tweeted Gianforte.
The state has banned app stores, like Apple (AAPL) and Google (GOOGL) (GOOG), from offering the app. TikTok and the app stores could face fines of $10000 per violation per day.
Expressing its disappointment over Montana’s ban, TikTok issued a statement saying, “Governor Gianforte has signed a bill that infringes on the First Amendment rights of the people of Montana by unlawfully banning TikTok, a platform that empowers hundreds of thousands of people across the state.”
TikTok added that it intends to continue to defend the rights of its users inside and outside of Montana.
The social media app has gained immense popularity in the U.S. and has over 150 million users in the country. Earlier this year, the Biden administration banned TikTok from government devices and threatened a nationwide ban if TikTok’s Chinese owners do not divest their stake. The U.S. is concerned that China’s Communist Party could have access to sensitive and personal information of the app’s American users.
At the congressional hearing held in March, TikTok CEO Shou Zi Chew was bombarded with questions about the app’s relationship to its parent company and China’s potential influence over the social media platform. Lawmakers seemed unconvinced with the CEO’s lengthy testimony and assurance about spending $1.5 billion on a program to safeguard U.S. user data and content from Chinese government access.
U.S. Stocks that Could Gain from TikTok’s Ban
Alphabet and social media stocks Meta Platforms (META) and Snap (SNAP), all of which operate short-form video platforms competing with TikTok, are expected to benefit from Montana’s TikTok ban and a potential nationwide ban. Alphabet through YouTube Shorts, Meta through its Facebook and Instagram Reels, and Snap with its Spotlight feature have all been trying to fight TikTok.
Currently, Meta stock is a Strong Buy, and Snap stock is a Hold, according to analyst consensus. The changing landscape of short-form video could vastly modify the fortunes of those two stocks.
