This week, the House of Representatives passed a bill that caught the attention of the entire country. Under the bill, popular social media app TikTok will be banned in the U.S. unless its Chinese conglomerate ByteDance agrees to sell it. This motion received strong bipartisan support, sponsored by Rep. Mike Gallager (R-WI) who introduced it along with Rep. Raja Krishnamoorthi (D-IL). Titled the Protecting Americans from Foreign Adversary Controlled Applications Act, this bill could severely disrupt the social media industry. But if the app is sold, the U.S. could avoid a TikTok ban — and an interested buyer has already stepped forward.
Steven Mnuchin spent years on Wall Street before being named U.S. Secretary of Treasury under former President Donald Trump. Now, he appears to be interested in social media. The former investment banker is putting together a group of investors to purchase TikTok. If their bid is successful, even bigger changes could lie ahead.
Why Investors Should Care About the TikTok Ban
The prospect of a TikTok ban in the U.S. has pushed social media stocks into full focus this week, yet it hasn’t generated any positive momentum. Snap (NYSE:SNAP) closed out the week down by 6% for the past five days. Meta Platforms (NASDAQ:META) is down by almost 3% over the same period. Finally, Digital World Acquisition (NASDAQ:DWAC) is down almost 2% over the past five days, although its ties to Trump have also continued to generate volatility instead of growth.
In a nutshell, there are two possible outcomes for TikTok. If the app isn’t sold, the U.S. ban could continue. That would theoretically boost other social media stocks, at least in the short term. However, it is more likely that the platform will be sold in the U.S., thereby keeping TikTok available to American users.
If that happens, Mnuchin or whoever ends up owning the platform will likely use their business experience to grow TikTok even further. They may even have an eye on taking it public. In that case, social media stocks would be severely compromised.
This is not the first time TikTok has come under fire. As InvestorPlace’s Shrey Dua reports:
“While this marks the first serious effort to restrict access to the app on a federal legislative level, TikTok has been controversial among lawmakers for some time. Indeed, last year, FBI Director Christopher Wray testified before Congress that TikTok is an instrument of the Chinese government.”
That said, things are moving forward rapidly this time and both parties seem to be in support of the historic bill. Investors should pay careful attention as this news develops. Whether TikTok is sold or banned will do much to determine the future of the social media sector. When Elon Musk purchased Twitter (now X), many things about the platform changed. TikTok could be in for a similar treatment.
On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
