Perplexity AI Proposes TikTok Merger with 50% U.S. Government Stake

Perplexity AI has put forward a new proposal to TikTok's parent company, ByteDance, suggesting a merger between Perplexity and TikTok's U.S. business that would grant the U.S. government up to a 50% ownership stake in the resulting entity, according to an insider familiar with the matter.

The proposal, submitted last week, revises an earlier plan presented by the artificial intelligence startup to ByteDance on January 18, the day before the law banning TikTok in the U.S. came into effect.

The initial proposal, which ByteDance has yet to respond to, aimed to create a new structure combining San Francisco-based Perplexity with TikTok’s U.S. operations and additional investments from other parties.

Under the revised plan, the U.S. government would be able to own up to 50% of the new entity once it conducts an initial public offering (IPO) worth at least $300 billion, according to the source, who spoke on condition of anonymity. The revision was made following feedback from the Trump administration. However, the government’s shares would not carry voting rights, and it would not have a seat on the company's board.

Neither ByteDance nor TikTok immediately responded to requests for comment.

The proposal allows ByteDance to retain its stake in TikTok without severing all ties, which would be a more favourable outcome for its investors. However, it would require ByteDance to cede "full U.S. board control," the source explained.

In this arrangement, ByteDance would contribute TikTok’s U.S. business without transferring the proprietary algorithm that drives content recommendations on the app, according to a document reviewed by the Associated Press.

This new proposal appears to align with a strategy discussed by Steven Mnuchin, Treasury Secretary during Donald Trump’s first term, on Fox News’ Sunday Morning Futures. Mnuchin suggested that a new investor in TikTok could "dilute down" the Chinese ownership and comply with the law. Mnuchin, who has previously shown interest in investing in TikTok, emphasised that the technology must be "disconnected from China." He added, "It needs to be disconnected from ByteDance. There's absolutely no way that China would ever let us have something like that in China."

The Perplexity proposal comes amid growing interest from several investors in acquiring a stake in TikTok. President Trump stated late Saturday that he expects a deal to be reached in as little as 30 days.

On a flight from Las Vegas to Miami aboard Air Force One, Trump also mentioned that he had not discussed a deal with Larry Ellison, CEO of software company Oracle, despite reports that Oracle and other investors were considering taking control of TikTok’s global operations.

"Numerous people are talking to me. Very substantial people," Trump said. "We have a lot of interest in it, and the United States will be a big beneficiary. ... I'd only do it if the United States benefits."

Under a bipartisan law passed last year, TikTok was set to be banned in the U.S. by January 19 unless it severed ties with ByteDance. The Supreme Court upheld the law, but Trump issued an executive order delaying its enforcement for 75 days.

Trump also clarified that while Ellison lives "right down the road" from his Mar-a-Lago estate, he had not spoken to him about TikTok. "I’ve spoken to many people about TikTok and there's great interest in TikTok," he added.

TikTok was briefly taken offline in the U.S. a week ago but returned after Trump announced he would delay the ban. Trump had previously attempted to impose a TikTok ban during his first term, but he later reversed his stance, crediting the platform for helping him gain more support from younger voters in the 2024 election.

TikTok CEO Shou Chew attended Trump’s inauguration on January 20, alongside other tech leaders who have worked to establish friendlier relations with the new administration.

Congress voted to ban TikTok over concerns that the platform’s ownership structure posed a national security risk. The Biden administration has argued in court that a Chinese company controlling the algorithm that determines what users see on TikTok is too great a threat. Additionally, concerns have been raised about the platform’s collection of user data.

However, the U.S. has not provided any public evidence that TikTok has shared user data with Chinese authorities or allowed them to alter its algorithm.