In a dramatic escalation between China and the United States, Donald Trump, the U.S President, has signed an order on Thursday to ban Tik Tok in America and encourage a merger with Microsoft.
While quoting a national emergency, Trump signed an order giving Chinese Tik Tok – a very popular social media that counts 30 active million users in the U.S – to find an American buyer within 45 days.
At the same time, WeChat has been banned from the United States, banning any transaction. Wechat, whose owner is Tencent, a Chinese company that owns shares in American companies of Tesla, Snap Inc an Reddit lost 10% of its value overnight on Asian markets.
Microsoft Shares Dropped By 2%
The trade war between Beijing and Washington seems to be far from being over. Last week, U.S President Trump signed an executive order declaring Chinese social media TikTok had to be sold to an American company within 45 days or it would be banned.While being in a Presidential race for his re-election, Donald Trump tried to make a move on a U.S-focused trade deal.
If you’re smart, you’ll buy a small stock in Microsoft and hold it till September.
— Co Exotic (@chilloncorey) August 3, 2020
Right after the announcement, Microsoft shares dropped almost 2% to 212 dollars, which is not as bad as last March when COVID-19 crashed the markets – the share went from $187 to $135 in a few days.
Read on Alvexo: “Dollar Drops to the Lowest Level Since 2018”
A “poisoned chalice”
But will the executive order be beneficial to Microsoft so the Seattle-based company buys TikTok at a fair price and expands its portfolio? According to Bill Gates, Microsoft’s founder, this Tik Tok deal could become a “poisoned chalice”, according to The Verge.
According to the Verge, Bill Gates suggested “that Facebook having some more competition is “probably a good thing” but that “having Trump kill off the only competitor, it’s pretty bizarre”.
I started working on this story a year ago, and this is the right week to get it out. How Microsoft laid roots in China, and seeded its future tech leaders, including TikTok's Zhang Yiming. “The soft power of Microsoft in China is immense." (thread) https://t.co/10BAvNPyht
— Yuan Yang (@YuanfenYang) August 6, 2020
Indeed, Marketwatch reported that this peculiar strategy gave unique numbers for the Dow Jones to share: “The Dow Jones Industrial Average is trading down Friday afternoon with shares of Microsoft facing the biggest losses for the blue-chip average.”
Competitors are eyeing TikTok
What if someone other than Microsoft was acquiring TikTok? According to the U.S media, many other companies are thinking of buying the Chinese social app, that already counts 30 million daily active users in America.
According to Variety, Twitter has already held a meeting with TikTok top executives and talked about a “merger”.
— Variety (@Variety) August 9, 2020
However, Twitter is planning to acquire only the content concept, while “Microsoft has said it is looking at acquiring TikTok’s U.S., Canada, Australia and New Zealand businesses, and the tech behemoth also reportedly is considering acquiring all of TikTok’s operations.”, analyses Variety.
In the meantime, Variety reports that TikTok is planning to sue the Trump administration this Tuesday “arguing the president’s unilateral move is unconstitutional because it denied TikTok any due process”, NPR reported.
The above content is considered to be market commentary information and shall not be perceived as independent investment research or investment advice.
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