Prime Highlights:
Perplexity AI has updated its merger proposal with ByteDance, involving the creation of a new U.S. holding company, “NewCo.”
The revised plan includes an offer for the U.S. government to acquire up to 50% of NewCo following a future IPO, potentially valued at $300 billion.
ByteDance would contribute TikTok U.S. (excluding its recommendation algorithm) in exchange for equity in the new company. Perplexity AI would also contribute its business in exchange for a stake.
Key Background:
Perplexity AI has revised its merger proposal with ByteDance, the parent company of TikTok, to include a potential 50% stake for the U.S. government in the newly formed entity following a future initial public offering (IPO). The revised proposal, which was submitted to ByteDance and shared with potential investors, outlines the creation of a new U.S.-based holding company, “NewCo.”
Under the new proposal, ByteDance would contribute TikTok U.S., minus its core recommendation algorithm, in exchange for equity in the new company. Perplexity AI, a rapidly growing artificial intelligence search engine startup, would also contribute its own business in exchange for a stake in the new entity. New third-party capital providers would fund the merger, which would include a one-time dividend payment to ByteDance investors in return for simplified governance and additional capital to support growth.
The revised proposal would give ByteDance’s existing investors the opportunity to retain equity stakes in the newly formed company, while also enabling Perplexity AI to expand into the video sector. While ByteDance has previously indicated it would not sell TikTok U.S., Perplexity’s proposal aims to structure the deal as a merger rather than a sale, increasing its chances of success.
According to sources familiar with the negotiations, the U.S. government could potentially acquire up to 50% of NewCo once the company undergoes an IPO, projected to value the entity at a minimum of $300 billion. Although the exact value of the transaction remains to be determined, estimates suggest it could exceed $50 billion.
This latest development comes amidst broader discussions on the future of TikTok in the U.S. President Donald Trump, who has temporarily reinstated TikTok in the country, has signaled that a decision regarding the app’s future could be made within the next 30 days. Perplexity AI is one of several parties, including Microsoft and Oracle, vying for a potential merger or acquisition of TikTok.