As expected, TikTok is taking a firm stance against legislation that would force either the sale of the short-form content app or its ban in the U.S.
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A Lengthy Legal Battle Begins
Last month, U.S. President Joe Biden signed legislation that could force ByteDance, the parent of TikTok, to either divest TikTok or face a ban in the U.S. Now, TikTok has sued the U.S. federal government to block the legislation. The lawsuit sets the stage for a long-drawn legal showdown.
While ByteDance has until January 19 to divest from TikTok, the company does not plan to comply with the deadline. Importantly, the legal challenge highlights ByteDance’s unwillingness to seek a potential buyer for TikTok. The company argues that the law violates the First Amendment and subjects it to punishment without due process, posing a threat to U.S. national security.
TikTok has argued that the law could hurt free speech and the creator economy on its platform. Last week, Blake Chandlee, the President of Global Business Solutions at TikTok, reassured advertisers that the company will not back down. Previously, TikTok had rallied its platform users to campaign against the divestment or sale bill. Now, a congressional committee has suggested that the company should be investigated for its tactics by the FTC (Federal Trade Commission).
TikTok Divestment Is Far From Certain
While TikTok’s legal counteroffensive is only just beginning, potential suitors for the app are already circling. Former U.S. Treasury Secretary Steven Mnuchin has shown interest in the app and noted that his plan involves rebuilding the app’s recommendation algorithms under U.S. leadership.
Nonetheless, a potential divestment of TikTok seems like a long shot, as such a move would also require Beijing’s blessing. Chinese authorities have indicated in the past that they will not allow a forced sale of TikTok.
Which Is the Best Social Media Stock to Invest In?
TikTok’s final fate could have far-reaching consequences for top social media names in the U.S., as the app boasts a user base of around 170 million. Over the past year, social media stocks such as Meta (NASDAQ:META), Spotify (NYSE:SPOT), and Snap (NYSE:SNAP) have delivered over 100% share price returns. Meanwhile, the TipRanks Stock Comparison Tool indicates the highest potential upside of 16.3% in Spotify stock over the coming periods.
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