TikTok mulls splitting from ByteDance if proposal with US fails

China’s TikTok is considering separating from parent ByteDance to help address US concerns about national security risks, Bloomberg News reported on Tuesday, citing people familiar with the matter.

A divestiture, which could result in a sale or initial public offering, is considered a last resort and will be pursued only if the company’s existing proposal with US national security officials does not get approved, Bloomberg reported.

TikTok and ByteDance did not immediately respond to Reuters requests for comment.

The short-form video app is undergoing a national security review by the Committee on Foreign Investment in the United States (CFIUS) and it agreed last year to implement a number of measures under the plan, nicknamed “Project Texas”, in an attempt to placate hostile lawmakers.

CFIUS has stalled in its process, leaving TikTok unsure of whether its plans will be sufficient to continue operating in the country, according to the report.

Members of CFIUS from the Justice Department have been unwilling to accept TikTok’s proposal, it added.

TikTok, used by more than 100 million Americans, has come under increasing fire over fears that user data could end up in the hands of the Chinese government, undermining Western security interests. TikTok Chief Executive Shou Zi Chew is due to appear before the U.S. Congress next week.

CFIUS, a powerful national security body, had in 2020 unanimously recommended that ByteDance divest TikTok because of fears that user data could be passed on to China’s government.

TikTok and CFIUS have been negotiating for more than two years on data security requirements. TikTok has said it has spent more than $1.5 billion on rigorous data security efforts and rejects spying allegations.

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