Perplexity AI Revises Merger Proposal for TikTok Parent ByteDance
Perplexity AI has revised its merger proposal for TikTok parent ByteDance, which would create a new entity combining Perplexity and TikTok U.S. The proposal, which was shared with ByteDance and prospective new investors, would allow for the U.S. government to own up to 50% of the new company upon a future IPO.
The proposal document outlines the creation of a new U.S. holding company, “NewCo,” which would be formed by contributing TikTok U.S., minus its core recommendation algorithm, in exchange for ByteDance’s existing investors receiving equity in the new company. Perplexity AI would offer itself up in exchange for its own investors receiving a distribution of the NewCo equity.
The proposal also includes a one-time dividend payment to ByteDance investors in exchange for simplified governance and to help the new entity grow. The money for the merger would come from new third-party capital providers, which would provide capital for the new entity.
Perplexity AI, an artificial intelligence search engine startup, has a valuation of around $9 billion after attracting increasing investor interest amid the generative AI boom. The proposed new structure would allow most of ByteDance’s existing investors to retain their equity stakes and would bring more video to Perplexity.
The revised proposal comes as the U.S. government has been seeking to acquire a stake in TikTok, with President Donald Trump suggesting plans that would involve an American stakeholder purchasing the company and then selling a 50% stake to the U.S. government. The deal would need to be approved by the Committee on Foreign Investment in the United States (CFIUS) and could take months to complete.