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Half (NASDAQ:META) and Google (NASDAQ:GOOG) (NASDAQ:GOOGL) are looking to make more money if laws targeting TikTok’s operations in the United States become law, according to Wedbush Securities.
Analyst Scott Devitt and others at the investment firm recently met with a former U.S. congressman Ryan Costello to discuss the implications of the Protecting Americans from Foreign Adversary Controlled Applications Act (HR 7521). Costello, who was in Congress from 2015 to 2019, estimates there is a 55% chance that some form of legislation will ultimately pass. However, he doubts China-based ByteDance (BDNCE) would free itself from TikTok, as the legislation requires, which would ultimately result in TikTok being expelled from the country.
H.R. 7521 quickly passed the U.S. House of Representatives on March 13, receiving broad bipartisan support with a vote of 352-65-1 in favor of the bill.
President Biden has already indicated he will sign HR 7521 into law if it reaches his desk.
The bill targets the “threat posed by applications controlled by foreign adversaries, such as TikTok and any successor applications or services, and any other applications or services developed or provided by ByteDance.”
“This bipartisan legislation is necessary to protect our national security and the privacy of American consumers,” said U.S. Rep. Shontel Brown (D-Ohio). “There are clear and legitimate concerns about applications being controlled by our foreign adversaries. It is imperative that Congress act to protect the public, young and old.”
A week after HR 7521 passed the House, the legislature unanimously passed a second bill, the Protecting Americans’ Data from Foreign Adversaries Act of 2024 (HR 7520).
HR 7520, which is related to HR 7521, would prohibit data brokers from selling sensitive personal information of Americans to foreign adversaries.
The Senate takes the reins
The U.S. Senate is expected to consider both bills together, with a vote taking place within the next two months, Costello said.
However, these bills will likely be amended before they reach the Senate floor, Costello said. For example, further clarification may be needed regarding the definition of “foreign adversary” or the term “data intermediary” may require further classification, the former MP said.
Additionally, the House version calls for TikTok to divest itself from ByteDance within 180 days. This timing is likely unreasonable for a deal of this size and complexity and will likely be modified by the Senate, Costello said.
“Should the bill slip into the summer or early fall months, it is unlikely to pass, according to Ryan, given the upcoming elections and the difficulty of maintaining the necessary political momentum for such a long period,” he noted Wedbush.
Meta, Google is ready to collect the spoils
If the two bills become law, ByteDance and the Chinese government have indicated resistance to divesting from TikTok, used by about 170 million Americans.
If TikTok were to be forced to leave the United States, Meta and Google would be the two companies best positioned to benefit from advertising redistribution, Wedbush said.
“Among people who use TikTok, 83%, 81% and 73% also use Facebook, Instagram and WhatsApp respectively,” Seeking Alpha analyst Yuval Rotem said. “From the opposite perspective, 51%, 52% and 50% of people who use Facebook, Instagram and WhatsApp are also on TikTok.”
“In my opinion, this means that, in the case of a TikTok ban, the time spent by overlapping users on Meta platforms will increase significantly,” he added.