In a bold move, U.S.-based search engine startup Perplexity AI has submitted a revised merger proposal to TikTok’s parent company, ByteDance. The proposal aims to create a new company, tentatively named NewCo, merging TikTok U.S. and Perplexity AI under a new structure. Sources familiar with the matter disclosed these developments on Sunday.
Key Highlights of the Proposal
The central feature of the merger proposal is the U.S. government’s stake in the new company. Under the plan, the government would own up to 50% of the entity after a future initial public offering (IPO), provided the company achieves a minimum valuation of $300 billion. This approach appears designed to address national security concerns and secure political support.
Perplexity AI has also proposed that ByteDance sell TikTok U.S. to investors, giving existing shareholders of TikTok equity in the new structure. However, the critical piece of TikTok’s recommendation algorithm would remain with ByteDance, ensuring that the Chinese company retains control over its proprietary technology.
As part of the merger proposal, Perplexity AI itself has expressed willingness to be acquired by the new holding company. In such a scenario, its investors would receive shares in the newly formed NewCo.
Background and Timing
This latest proposal follows significant political and regulatory challenges that TikTok has faced in the U.S. due to data security concerns. Just last week, TikTok resumed its U.S. operations after an extended shutdown caused by legislation citing national security threats. President Donald Trump has also expressed interest in resolving TikTok’s future and confirmed ongoing discussions with various stakeholders. A decision is expected within the next 30 days.
Notably, CNBC was the first to break the news of the merger proposal, while Reuters reported earlier this month that Perplexity AI had submitted its initial bid to merge with TikTok U.S. This revised proposal includes partnerships with new investors, adding more weight to the deal.
Implications and Outlook
If successful, this merger could redefine the competitive landscape for social media and AI platforms, creating a U.S.-centric entity with significant market influence. By addressing security concerns and ensuring a stake for the U.S. government, Perplexity AI’s proposal could gain traction with regulators and policymakers.
Neither ByteDance nor the White House has commented on the proposal so far. With growing pressure to resolve TikTok’s standing in the U.S., this merger could emerge as a pivotal moment in the tech and social media industries.
