Investing.com — The Supreme Court will begin hearing arguments today regarding a law that could lead to a ban or sale of TikTok in the U.S. If the app isn’t sold by Chinese parent company ByteDance, the law, which was signed by President Joe Biden with bipartisan support, would block TikTok in the U.S. This law is set to take effect on Jan. 19.
This potential ban is being challenged by TikTok on First Amendment grounds, with the company referring to it as an “unprecedented censorship” for the over 170 million Americans who use the app. The Supreme Court’s decision could have significant repercussions for stocks such as Meta (NASDAQ:META) and Oracle (NYSE:ORCL), among others.
If TikTok is banned, it is expected that Meta, Snap, and Alphabet (NASDAQ:GOOGL), the parent company of YouTube, would likely gain market share. On the other hand, Oracle, which hosts the app, could see a loss in income.
Analysts at Morgan Stanley (NYSE:MS) have suggested that a TikTok ban would present a significant opportunity for competitors as users would likely redirect their time to other platforms. They predict that Meta and YouTube would be the primary beneficiaries of this shift, with some time also going to Snapchat, owned by Snap, as well as Reddit and Pinterest (NYSE:PINS).
Research firm EMARKETER has projected that TikTok collected $10.4 billion in U.S. ad revenue last year, equating to roughly 12% of social media ad spending in the U.S. and 3% of the U.S. digital advertising market. In the event of a ban, they estimate that Meta and Google, via YouTube, would collect about half of the “dislocated” advertising dollars from TikTok.
Meanwhile, TikTok is a significant customer of Oracle’s cloud infrastructure business. Analysts from Evercore ISI have estimated that TikTok could be worth between $480 million and $800 million in annual revenue for Oracle Cloud Infrastructure, which is about 5% of the division’s sales. Oracle has warned that a TikTok ban could negatively impact its revenue if the company cannot redeploy that capacity in a timely manner.
The law does provide an option for ByteDance to sell TikTok. So far, ByteDance has appeared reluctant to do so. However, there has been speculation about potential buyers, including e-commerce giant Amazon (NASDAQ:AMZN) and retail corporation Walmart (NYSE:WMT). Both companies were suggested by Morgan Stanley analysts as potentially strategic acquirers, but neither has publicly expressed interest since the TikTok ban bill was passed.
A group known as Project Liberty, formed by billionaire entrepreneur and former Los Angeles Dodgers owner Frank McCourt, has made an offer to ByteDance. Shark Tank’s Kevin O’Leary backs the group, but the value of their bid has not been disclosed.
As the Supreme Court hears the arguments today, the future of TikTok in the U.S., and the repercussions for other tech companies, hangs in the balance.
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