Hayman Capital's Kyle Bass on TikTok-Oracle deal

U.S.-China tensions over TikTok are putting pressure on the markets. Kyle Bass, founder and chief investment officer at Hayman Capital Management, joins "Squawk Box" to discuss. Subscribe to CNBC PRO for access to investor and analyst insights on tech and more: https://cnb.cx/3dIH56N

Maybe the simplest way to think about what’s happening with TikTok is collateral damage.

The Trump administration has used technology companies as a battleground for geopolitical warfare with China. It blocked Broadcom’s attempt at buying Qualcomm in 2018 over arrangements with “third party foreign entities.” It banned U.S. government agencies from doing business with Chinese telecom companies ZTE and Huawei. It forced a Chinese company that acquired LGBTQ dating app Grindr to sell the application.

TikTok is just the latest example of another way the Trump administration can assert its leverage over China, which has limited or prohibited American companies from operating within its borders for many years.

President Donald Trump has claimed the service, which has more than 100 million U.S. monthly active users, is a threat to national security. TikTok collects a lot of information about U.S. users, including sign-up information and their activities on the service, and could share this information with the Chinese government.

Trump used the Committee on Foreign Investment in the United States (CFIUS) -- his weapon of choice to thwart Chinese acquisitions and operations -- to force a sale of the company by Nov. 15, and threatened to ban it in the U.S. if a sale didn’t happen.

TikTok, which was majority owned by Chinese company ByteDance, claims it doesn’t share data with the Chinese government. It has spent months in meetings with Trump administration officials pleading its case. According to two people familiar with the company’s thinking, some TikTok executives viewed Trump’s actions as retaliation for a political prank in June, when teenagers organized over the service to reserve seats a Trump rally in Tulsa, Oklahoma, and didn’t show up, leaving thousands of seats empty; another theory at the company is that the president’s trade advisors were taking a cue from India’s ban of TikTok in June as a new way to needle China. A TikTok spokesperson declined to comment.

Even if the U.S. government has reason to suspect TikTok is lying and has shared data -- or could share data in the future -- the current brokered deal of selling minority stakes in TikTok to Walmart and Oracle while setting up a new cloud computing deal with Oracle falls far short of the original threat.

The result resembles something from Trump’s famous book “Art of the Deal”: Talk big, then end on a compromise.

“It started obviously simply — to say we want to protect the security of Americans from anything that could happen to them by using TikTok,” IAC Chairman Barry Diller said Tuesday on CNBC’s “Squawk Box.”

“It has now morphed into a ludicrous game-match between tossing ownership here, control there….Its original aims are out the window. In has just come a whole political mishmash.”

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