Investors wary of legal risks in Trump's TikTok deal

Investors are becoming cautious about the proposal for US ownership of TikTok, which is backed by Donald Trump. Concerns are rising due to potential lawsuits that may arise from this deal. Legal experts warn that investors should consider getting protection from the White House to shield themselves from liabilities. The worries stem from past legislation and a Supreme Court ruling that require a complete divestiture from the Chinese owners, ByteDance. Investors fear that falling short of these legal standards could lead to hefty penalties. One Wall Street executive stated that their lawyers are expressing concerns about this issue. TikTok has been popular among American youth, but it has faced scrutiny for its data practices and potential influence on young minds. Trump originally sought to ban the app during his presidency, citing security risks related to Chinese data handling. However, he later changed his stance, noting that TikTok helped him gain support among younger voters. The White House is currently looking to involve tech company Oracle in the deal. Oracle is already hosting TikTok’s data in its cloud. However, while the new structure would separate TikTok legally from its Chinese owners, concerns remain about ByteDance's continued control over the app's algorithm. Lawmakers, including Senator Tom Cotton, are skeptical that the proposed deal will meet legal requirements. The potential liabilities for investors are significant, especially since TikTok has around 170 million users in the US. This could lead to penalties worth billions, making investors think twice about participating in the deal. At this point, Oracle has not shown any commitment to owning TikTok, focusing instead on hosting its data. Legal challenges may arise if the deal is seen as insufficient, putting off even the wealthiest investors from getting involved.