On January 26, Perplexity AI, a US search engine startup, revised its merger proposal, which was earlier submitted as a bid to TikTok’s parent company, ByteDance. The updated proposal now allows the US government to have 50% ownership of a new merger created upon a future IPO. As per sources, the proposal document shared with ByteDance and potential investors had a new merger company named, “NewCo.”
The proposal suggests that ByteDance contribute to TikTok U.S., excluding its core recommendation algorithm, in exchange for its current investors receiving shares in the new company. Perplexity AI would join in, offering its investors a share of the new company’s equity.
Perplexity AI’s TikTok Merger Proposal
According to sources, the revised proposal suggests the U.S. government could own up to 50% of the new company once it goes public, valued at $300 billion or more. The fair price is “well above $50 billion,” but the final amount will depend on which of ByteDance’s current shareholders want to stay in the new company and which prefer to cash out.
The new structure would let most of ByteDance’s current investors keep their equity and bring more video content to Perplexity, a source told CNBC. While ByteDance has suggested it won’t sell TikTok U.S., Perplexity AI believes its merger proposal has a chance, as it’s not a sale, the source added.
Perplexity AI Search Engine – Google’s Rival
Perplexity AI, an AI search engine startup challenging OpenAI and Google, began 2024 with a $500 million valuation and ended the year at around $9 billion. The surge in value came as investor interest grew during the generative AI boom, despite plagiarism accusations. Investors see AI-driven search as a major threat to Google, as it could reshape how people find information online.
Last year, OpenAI kicked off the generative AI trend with ChatGPT and then launched a search engine called SearchGPT. Google followed with “AI Overviews” in search, giving users quick answer summaries at the top of results.
US TikTok Ban Update
Perplexity is among several companies and individuals, including Microsoft, Oracle, and possibly Elon Musk, competing to buy or merge with TikTok. On Saturday, President Trump stated he would likely decide the app’s future in the U.S. within 30 days.
While a potential deal between Perplexity AI and ByteDance could take months, the new US government has temporarily allowed TikTok to stay in the U.S. and proposed that an American buyer acquire the company, and then sell 50% of it to the U.S. government.
