The Art of the Deal (Fee): Trump and TikTok

President Trump recently called for the U.S. Government to get a slice of proceeds from the forced sale of TikTok to a U.S. buyer.

There may be legitimate national-security reasons for Trump to force TikTok’s Chinese owners to sell the personal-data-rich social media application to U.S. investors. And arguably, the forced sale will take place at a lower price than that between a willing buyer and seller.

But why should Uncle Sam get a slice of deal proceeds? And if the forced sale happens at a discount, who should enjoy the windfall?

In M&A areas like anti-trust, the Government often compels one or both parties to divest themselves of assets. The Government doesn’t take a cut, though it might receive tax revenues from the sale.

With regard to TikTok, nothing in law or ethics entitles Uncle Sam to a piece of the deal pie. In fact, letting the government compel a sale and then take a percentage of deal proceeds sets up perverse incentives. If anyone should recoup the discount, it should be TikTok’s investors, who built the company and apparently grew it fair and square.

So what gives? Both Trump’s supporters and detractors note his talent for sucking up all the oxygen in the room and generating free publicity. His call for a deal fee attracts coverage of him being tough on China and concerned with personal data privacy. The call also takes place during the Democrats’ virtual convention. Any coverage or attention spent on Trump and TikTok detracts from his political opponents’ messaging.

Maybe that is Trump’s cut of the deal after all.

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