On Sunday, January 26, the American artificial intelligence (AI) startup Perplexity AI proposed a new merger offer to TikTok. The proposal aims to merge the two companies to create a new entity and allow the U.S. government to hold up to 50% of the shares.
According to reports from various U.S. media outlets, the proposal seeks to establish a new American holding company called “NewCo.” ByteDance will provide TikTok’s U.S. business (excluding its core recommendation algorithm) to merge with Perplexity AI and incorporate investments from other investors.
Sources told the Associated Press and CNBC that under the revised plan, once the new entity’s initial public offering (IPO) reaches over $300 billion, the U.S. government could acquire up to half of the shares. Sources indicated that the new proposal was modified based on the Trump administration’s feedback.
The transaction would be a merger rather than a requirement for ByteDance to sell. Therefore, this new structure will allow ByteDance to retain ownership for the majority of its existing investors. However, sources stated that ByteDance must allow the “U.S. board to have full control” of the new entity.
Perplexity, launched in 2022, is a conversation search engine powered by an AI chatbot. Its valuation was approximately $500 million in early 2024, and after a new round of financing, it reached around $9 billion by the end of the year. Investors believe that AI-assisted search could be a major challenge to Google, potentially altering how consumers obtain information online.
This new merger proposal appears to align with the strategy proposed by Steven Mnuchin, the former Treasury Secretary during Trump’s first term in office.
On Sunday, Mnuchin suggested on Fox News’ Sunday Morning Futures that TikTok’s new investors could “dilute” Chinese ownership to meet regulatory requirements. Mnuchin had previously expressed interest in investing in the company himself.
Mnuchin added, “But the technology needs to be detached from China. It needs to be decoupled from ByteDance. China [CCP] would never allow us to have something similar in China.”
As Perplexity extended the merger invitation, many investors also expressed interest in TikTok. President Trump stated on Saturday that he expected a deal to be reached within the next 30 days.
Currently, many companies and individuals, including Microsoft, Oracle, and Elon Musk, have shown interest in acquiring or merging with TikTok.
“A lot of people are talking to me, a lot of people,” Trump said at the time. “We’re very interested in this, America will be a major beneficiary.”
“I will only do this if the U.S. benefits,” he added.