Team Biden Reportedly Warns TikTok Ban Unless Chinese Owners Divest Stake — Meta, Snap Shares Shoot Up

President Joe Biden's administration reportedly demanded that TikTok’s Chinese owners divest their stake in the popular application, failing which it would face a ban in the United States.

What Happened: The Committee on Foreign Investment in the U.S., or Cfius, made the demand for the sale in recent days, reported The Wall Street Journal, citing people familiar with the matter. The Committee has multiple agencies and oversees national security risk in international investments.

Republicans have criticized the Biden administration for not taking a stronger stance against the app owned by the privately held ByteDance Ltd.

"If protecting national security is the objective, divestment doesn't solve the problem: a change in ownership would not impose any new restrictions on data flows or access," a TikTok spokesperson told Benzinga in an emailed statement. "The best way to address concerns about national security is with the transparent, U.S.-based protection of U.S. user data and systems, with robust third-party monitoring, vetting, and verification, which we are already implementing."

See Also: How To Invest In Tech Startups

Why It Matters: According to TikTok executives, 60% of ByteDance’s shares are owned by global investors, 20% by employees, and 20% by the founders, reported the Journal.

TikTok said it had set aside $1.5 billion for a program to safeguard U.S. user data and content from Chinese government access or influence, according to the report. 

Negotiations between Cifus and TikTok have reportedly been going on for over two years but are at a stalemate. 

Former President Donald Trump tried to force a sale of TikTok to Microsoft, Oracle, and Walmart. More recently, the U.S. House Foreign Affairs Committee voted to give Biden the power to ban the app.

A recent Benzinga survey asked users to which app they would shift to if TikTok was banned: 38.3% chose Meta-owned Instagram, 14.8% said they would move to Facebook, 26.3% responded Twitter and 20.6% indicated a move to Snapchat.

Price Action: Shares of TikTok rivals Meta Platforms Inc META and Snapchat owner Snap Inc SNAP shot up 2.4% to $202.57 and 5.4% to $10.91, respectively, in after-hours trading.

On Wednesday, Meta shares closed 1.9% higher at $197.75 and Snap shares closed 0.2% lower at $10.35 in the regular session.

Read Next: UAE Spymaster Reportedly Buys Stake In TikTok At $220B Valuation Amid Possible US Ban