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Perplexity AI Proposes Revised Merger Plan with TikTok U.S., Offers Government Stake

Perplexity AI Proposes Revised Merger Plan with TikTok U.S., Offers Government Stake

In a bold and potentially groundbreaking move, artificial intelligence startup Perplexity AI has revised its merger proposal with TikTok’s Chinese parent company ByteDance, introducing a plan that would grant the U.S. government up to a 50% stake in TikTok’s U.S. operations following a future initial public offering (IPO). This latest development was reported by Reuters and The Associated Press, citing sources familiar with the matter.

Key Details of the Proposal

The revised proposal centers on the creation of a new U.S.-based holding company, referred to as “NewCo.” Under this structure, ByteDance would sell TikTok’s U.S. operations to investors, who would in turn offer equity to TikTok’s existing stakeholders. Perplexity AI has also outlined its willingness to be acquired by this holding company, provided its investors receive equity distributions in NewCo.

One of the most significant aspects of the proposal is the exclusion of TikTok’s core recommendation algorithm, which ByteDance would retain. The U.S. government’s stake in the company, projected at up to 50%, would materialize post-IPO, contingent on a valuation of at least $300 billion.

Perplexity AI’s Strategy

According to the revised proposal, Perplexity AI plans to merge with TikTok’s U.S. operations and subsequently integrate with New Capital Partners to form the new entity. This merger-based approach, rather than a direct sale, could make Perplexity’s bid more attractive to both ByteDance and U.S. authorities. By emphasizing a partnership structure and granting the U.S. government significant equity, Perplexity aims to address national security concerns while maintaining a competitive and innovative operational framework for TikTok.

A source familiar with the matter highlighted Perplexity’s confidence in the bid, stating that the unique merger structure might provide a favorable alternative to an outright sale, thereby increasing the likelihood of its acceptance.

Implications of the Proposal

If approved, the proposal could set a precedent for future transactions involving foreign-owned technology companies facing national security scrutiny. The inclusion of a substantial government stake underscores the growing trend of public-private partnerships aimed at safeguarding critical technologies while fostering economic growth.

Additionally, the retention of TikTok’s core algorithm by ByteDance indicates a compromise that allows the company to preserve its intellectual property while addressing U.S. concerns over data governance and operational transparency.

What’s Next?

As the 30-day deadline approaches, all eyes will be on the negotiations between ByteDance, Perplexity AI, and U.S. authorities. If the proposal is accepted, it could mark a new chapter for TikTok’s U.S. operations and redefine the landscape for technology mergers involving global stakeholders.

The coming weeks will be critical in determining whether Perplexity AI’s ambitious proposal gains traction and paves the way for an innovative resolution to one of the most closely watched corporate challenges of recent years.

Reference

Reuters – https://www.reuters.com/markets/deals/perplexity-ai-revises-tiktok-merger-proposal-that-could-give-us-government-50-2025-01-26/

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