Perplexity AI Revises TikTok Merger Proposal, Adds 50% U.S. Government Stake

Perplexity AI has revised its merger proposal with TikTok's parent company, ByteDance, to include a provision allowing the U.S. government to own up to 50% of the new company after a future IPO. The proposal, revealed Sunday, outlines the formation of a U.S.-based holding company called “NewCo,” combining TikTok U.S. and Perplexity AI in a groundbreaking merger.

Key Details of the Proposal

New Holding Company:

• ByteDance would contribute TikTok U.S., excluding its core recommendation algorithm.

• Perplexity AI would merge by offering equity in the new entity to ByteDance's investors, while ensuring its own investors also receive equity in the new company.

• This merger would also enable Perplexity to integrate video capabilities into its platform, leveraging TikTok's strengths in video content

Funding Structure:

• A “one-time dividend payment” would go to ByteDance investors, to streamline governance and support the growth of the new entity

• Capital for the merger would come from agreed-upon third-party investors.

U.S. Government Ownership:

The revised proposal includes a provision allowing the U.S. government to own up to 50% of the new company after an IPO at a valuation of at least $300 billion.

Fair Valuation:

ByteDance's TikTok U.S. unit is valued "well north of $50 billion," though the final valuation depends on how many shareholders stay on or cash out.

Perplexity AI’s Rapid Rise

Perplexity AI, an AI-driven search engine startup competing with OpenAI and Google, has experienced meteoric growth:

• 2024 Valuation: Started the year at $500 million and ended at $9 billion.

• Generative AI Boom: Investor interest surged as AI-assisted search emerged as a major disruptor, posing a threat to Google’s traditional search dominance.

This boom follows the launch of rivals like OpenAI’s SearchGPT and Google’s AI Overviews, intensifying competition in AI-driven search.

Context and Potential Implications

Why Perplexity AI Believes the Deal Could Work:

ByteDance has publicly stated it does not plan to sell TikTok U.S., but the merger structure avoids a sale, allowing ByteDance to retain equity while bringing additional capital and functionality to Perplexity AI.

The merger would expand Perplexity’s video capabilities, making it a more versatile platform.

Trump Administration’s Role:

President Donald Trump, who reinstated TikTok in the U.S. temporarily, has expressed interest in a solution involving American ownership and a government stake.

TikTok’s CEO, Shou Zi Chew, thanked Trump for his efforts, signaling cooperation in finding a resolution.

Competing Bids

Perplexity AI is not alone in its pursuit of TikTok U.S. Other entities vying for a deal include Microsoft, Oracle, and possibly Elon Musk, highlighting the intense competition to control TikTok’s U.S. operations.

While any transaction between Perplexity AI and ByteDance could take months to finalize, President Trump stated on Saturday that he expects to make a decision on the app’s future in the U.S. within the next 30 days.

Looking Ahead

The revised merger proposal by Perplexity AI underscores the growing significance of AI-driven platforms and geopolitical considerations in tech mergers. If successful, the deal could create a precedent for government ownership in major tech companies, altering the industry’s landscape.

With a decision from President Trump expected in the next 30 days, the future of TikTok U.S. could dramatically reshape how AI and social media platforms operate under regulatory and political scrutiny.

Editor’s Note: This article was created by Alicia Shapiro, CMO of AiNews.com, with writing, image, and idea-generation support from ChatGPT, an AI assistant. However, the final perspective and editorial choices are solely Alicia Shapiro’s. Special thanks to ChatGPT for assistance with research and editorial support in crafting this article.