Oracle Thrashes Microsoft in Bidding War for TikTok

What’s happening: Shares of Oracle Corporation gained on Monday following news that China’s ByteDance had chosen the US database software company to be its technology partner for TikTok.

What happened: Although Oracle is one of the biggest firms in the technology sector, its share performance has been relatively subdued this year versus other leading tech and chipmaker stocks.

The deal between Oracle and TikTok appears as a corporate restructuring rather than the complete sale of ByteDance’s US operations as proposed by Microsoft. The ball, however, is now in Trump’s court.

Why it matters: Oracle has beaten top contenders Microsoft and Walmart in negotiations for the US business of TikTok, which was nearing its September 20 deadline of facing a shutdown in the US.

The Trump Administration had asked TikTok to close its US operations, citing national security issues, in case the company failed to sell its assets in the country to a domestic company. Last month, TikTok sued the Trump administration over the crackdown, stating that the US government misused its power as there was no evidence of the platform posing a national threat.

Oracle confirmed that TikTok parent ByteDance had submitted its name in a proposal to the US Treasury Department to serve as a technology partner for its short video sharing app. Treasury Secretary Steven Mnuchin announced that the Trump Administration will be scrutinise the Chinese company’s offer this week.

There is uncertainty around the deal clearing regulatory approval and, even if it does, whether Oracle will be able to prevent the app from being banned in the US.

How shares responded: Oracle’s shares rose 4.3% to close at $59.46 on Monday, following news of the deal win. The stock has climbed around 12% year to date.

What to watch: Investors will be monitoring news of the Trump administration’s review of the offer, hoping that the US government gives a green signal to the proposal that will allow TikTok to continue its operations in its second largest market. Investors expect the Chinese government to approve the deal.

US stocks will be in focus today, ahead of a basket of economic reports scheduled for release later in the day.

Context: Stocks on Wall Street closed higher on Monday as market sentiment was lifted by hopes of a covid-19 vaccine being launched soon as well as various M&A news.

Details: Investors rejoiced at news of AstraZeneca resuming clinical trials in the UK for its covid-19 vaccine candidate. Meanwhile, Pfizer’s CEO Albert Bourla said that the company’s vaccine could be available for distribution in the US as early as by yearend, provided it receives approval.

In M&A news, Nvidia announced plans to buy ARM Holdings from SoftBank Group in a $40 billion deal, making it the most expensive acquisition in the history of the semiconductor industry. Gilead Sciences also inked an agreement to acquire Immunomedics for $21 billion, and Oracle was chosen by ByteDance as a technology partner for TikTok.

The Dow Jones index gained 327.69 points to close at 27,993.33 on Monday, after recording a weekly decline of 1.7%. The S&P 500 rose 1.3% to 3,383.54, while the Nasdaq 100 surged 1.7% to settle at 11,056.65 on Monday, ending a two-session downturn.

What to watch: Investors await data on import prices, export prices, New York Empire State manufacturing index and industrial production. Import prices, which rose 0.7% in July, are expected to improve another 0.5% in August. Export prices are projected to increase 0.4% in August. The New York Empire State manufacturing index is expected to surge to 6 in September, from August’s 3.7 reading. Analysts expect 1% industrial production growth in August, versus a 3% rise in July.

Other Markets: European indices trading closed mixed on Monday, with the FTSE 100 and DAX 30 falling 0.10% and 0.07%, respectively, and the French 40 gaining 0.35%.

France’s inflation rate, Italy’s inflation rate, Eurozone’s ZEW indicator of economic sentiment, labour costs and wage growth, Germany’s ZEW indicator of economic sentiment, Saudi Arabia’s inflation rate, South Africa's SACCI business confidence index, Russia's industrial production, Canada’s new motor vehicle sales and manufacturing sales as well as the US Redbook index and API’s crude oil stockpiles.

ADS Securities London Limited “ADSS” is an execution-only service provider. This material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or investment objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by ADSS that any particular investment, security, transaction or investment strategy is suitable for any specific person. To the extent that any content in this material is construed as investment research, you must note and accept that the content was not prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.  This material may contain links to third party websites, and any content, or use of your personal data by any third party websites is not the responsibility of ADSS or any member of the ADSS Group.