AI (artificial intelligence) startup Perplexity AI proposed a new merger offer to TikTok owner ByteDance on Sunday, January 26. The offer involves merging the Chinese social media app with Perplexity and then going for an IPO (initial public offering). The U.S. government would be given a 50% stake in the new company (NewCo.).
For both Perplexity AI and TikTok, the merger presents a chance to become a super tech-enabled social media platform while ensuring a massive fan following in the U.S. The combined entity would pose a big threat to existing players such as Meta Platforms (META), Snapchat (SNAP), Alphabet (GOOGL), and Elon Musk-owned X.
Perplexity AI Extends Attractive Proposal to TikTok U.S.
Perplexity has devised an interesting merger proposal for TikTok’s U.S. operations. According to the proposal, ByteDance would have to give up TikTok’s U.S. operations minus its proprietary recommendation algorithm that draws users to the app. In exchange, ByteDance’s existing shareholders will get equity in the merged company. At the same time, Perplexity AI will become a part of the combined entity, with its existing investors receiving equity in the new company.
Furthermore, the capital for the new company would come from new third-party investors. This money would be used for a one-time dividend distribution to ByteDance’s investors in exchange for a simplified governance structure. Perplexity would use its own AI expertise to attract users to the new platform as well as to power content discovery, creator tools, and e-commerce operations.
More on the Proposed Perplexity-TikTok Deal
The NewCo. would be valued at roughly $300 billion in the IPO process. The offer states that the government could own 50% of the company once listed, but will not have any voting rights nor a seat on the NewCo.’s board.
For ByteDance, the proposal makes sense because its existing shareholders will get ownership in the newly formed company. However, they will have to agree to a “full U.S. board control” of the merged entity. Although the offer seems fair, the proposal would have to undergo stringent scrutiny by the Federal Trade Commission (FTC) and the Committee on Foreign Investment in the United States (CFIUS).
This is Perplexity’s second offer for TikTok U.S. Earlier this month, the AI startup had proposed an acquisition offer for the U.S. operations, for which there was no reply from ByteDance. The revised merger offer stems from the feedback of U.S. President Trump’s administration. Trump said on Saturday that he expects a TikTok U.S. deal to be made within 30 days. The President also said that they have received takeover interests from several potential buyers and a deal would only be made if the U.S. stands to be a big beneficiary.
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