TikTok Troubles: How Far will They Go?
In this note we analyze the risk to TikTok that the federal government will ban the service in the United States. In the past, we have been skeptical that the federal government would act in a way that hurt TikTok and helped its rivals. This week, however, TikTok’s troubles suddenly and significantly escalated, with the sudden and unanimous passage by House Committee of new legislation. As to what happens next:- This week the legislation will go to the House floor where it will almost certainly pass.
- It will go to the Senate where we think it will probably pass, though Trump’s sudden and odd flip flop on the issue, adds uncertainty.
- If it passes, it will go to the President who will sign it.
- It then goes to the courts, where there is a better than even chance the courts will find it violates the First Amendment, but the national security issues, which have not been made fully public, could cause the courts to uphold the law.
- In short, while we think TikTok avoids a ban (and a divestiture would not help its competitors, so the ban is what is investor relevant), the risk is much higher than it has ever been.
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