Perplexity AI, a rising search engine startup, has submitted a revised proposal to TikTok’s parent company, ByteDance, suggesting the creation of a new entity combining Perplexity with TikTok’s US operations.
According to sources familiar with the matter, this new structure would allow the US government to own up to 50% of the merged company after its eventual initial public offering (IPO), projected to reach a valuation of at least $300 billion.
This latest proposal, submitted in late January, revises a previous offer made by Perplexity on January 18, just before a law banning TikTok in the US was set to take effect. The initial proposal sought to merge Perplexity, based in San Francisco, with TikTok’s US business, alongside investments from other investors. ByteDance has not yet responded to the proposal.
Under the new plan, ByteDance would contribute TikTok’s US operations—excluding its core recommendation algorithm—to the proposed structure. In exchange, ByteDance’s investors would receive equity in the new company, referred to as “NewCo.” The US government’s potential 50% stake in NewCo would not come with voting rights or a seat on the board, allowing for “full US board control,” as outlined by the sources.
The proposal appears to be designed to comply with US concerns over national security and data privacy while allowing ByteDance to retain a stake in TikTok’s US operations. Additionally, it reflects feedback from the Trump administration, which had suggested that a dilution of Chinese ownership in TikTok could potentially resolve security concerns and allow the app to continue operating in the US.
This move by Perplexity AI comes amid growing interest from several potential investors, including tech giants like Oracle, who are eager to either purchase or merge with TikTok. President Trump has expressed his intent to make a decision about TikTok’s future in the US within the next 30 days, further fueling speculation about the platform’s potential restructuring.
Although ByteDance has publicly stated that it does not intend to sell TikTok’s US operations outright, Perplexity believes its proposal offers a favorable alternative that would avoid a full divestment. Under the revised plan, ByteDance’s investors could maintain their equity stakes, while Perplexity would contribute additional capital to support the new company’s growth.
The proposal also highlights the broader geopolitical context, including trade tensions and national security concerns, which have made TikTok a point of contention between the US and China. In particular, the US government has expressed concerns about TikTok’s data collection practices and its ties to the Chinese government, despite a lack of concrete evidence that TikTok has shared data with Chinese authorities.
With input from the Associated Press, CNBC, and Reuters.
