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Meta (NASDAQ:META) and Google (NASDAQ:GOOG) (NASDAQ:GOOGL) look to gain the most if bills targeting TikTok operations in the U.S. become law, according to Wedbush Securities.
Analyst Scott Devitt and others at the investment firm recently sat down with former U.S. Congressman Ryan Costello to discuss the implications of the Protecting Americans from Foreign Adversary Controlled Applications Act (H.R. 7521). Costello, who was in Congress from 2015 to 2019, estimated there is a 55% chance some form of the legislation will eventually be passed. However, he doubts China-based ByteDance (BDNCE) would divest from TikTok — as the legislation requires — which would ultimately result in TikTok being forced out of the country.
H.R. 7521 breezed through the U.S. House of Representatives on March 13, receiving wide bipartisan support with a vote of 352-65-1 in favor of the bill.
President Biden has already indicated he will sign H.R. 7521 into law if it reaches his desk.
The bill targets the “threat posed by foreign adversary controlled applications, such as TikTok and any successor application or service and any other application or service developed or provided by ByteDance.”
“This bipartisan legislation is needed to protect our national security and the privacy of American consumers,” said U.S. Congresswoman Shontel Brown (D-Ohio). “There are clear and legitimate concerns about applications subject to control by our foreign adversaries. It is imperative Congress take action to protect the public, young and old.”
One week after H.R. 7521 passed the House, the legislative body passed a second bill, the Protecting Americans’ Data from Foreign Adversaries Act of 2024 (H.R. 7520), unanimously.
H.R. 7520, which is related to H.R. 7521, would prohibit data brokers from selling Americans’ sensitive personal information to foreign adversaries.
Senate takes the reigns
The U.S. Senate is expected to review both bills together, with a vote occurring within the next two months, Costello said.
However, these bills will likely be modified before they hit the Senate floor, Costello said. For instance, more clarification might be needed regarding the definition of a “foreign adversary” or the term “data broker” may need further classification, the former Congressman said.
Also, the House version calls for TikTok to divest from ByteDance within 180 days. This timeline is likely unreasonable for a deal of this size and complexity and will likely be modified by the Senate, Costello said.
“If the bill slips to the summer months or early fall, it is unlikely to pass in Ryan’s view, given the upcoming election and the difficulty maintaining the necessary political momentum for such an extended period,” Wedbush noted.
Meta, Google poised to reap the spoils
If the two bills become law, ByteDance and the Chinese government have indicated resistance to divesting from TikTok, used by approximately 170M Americans.
Should TikTok be forced to leave the U.S., Meta and Google are the two companies best positioned to benefit from the redistribution of advertising, Wedbush said.
“Of the people who use TikTok, 83%, 81%, and 73%, also use Facebook, Instagram and WhatsApp, respectively,” said Seeking Alpha analyst Yuval Rotem. “From the opposite angle, 51%, 52% and 50% of people who use Facebook, Instagram and WhatsApp, are also on TikTok.”
“In my view, this means that in the case of a TikTok ban, time spent by overlappers on Meta’s platforms will increase meaningfully,” he added.