Perplexity AI proposes TikTok merger with planned IPO
Perplexity AI updates TikTok U.S. merger plan with government ownership option
Artificial intelligence startup Perplexity AI has revised its merger proposal to ByteDance, the parent company of TikTok, suggesting a deal that would create a new U.S.-based entity, “NewCo.”
The updated proposal, revealed Sunday, includes provisions for the U.S. government to acquire up to 50% ownership of NewCo following a future IPO, reports CNBC.
The merger would combine Perplexity AI’s generative AI search capabilities with TikTok’s U.S. operations, excluding TikTok’s core recommendation algorithm. ByteDance’s existing investors would retain equity in the new company, while Perplexity AI’s investors would receive a distribution of NewCo shares.
To fund the merger, Perplexity proposed seeking capital from third-party investors, which would finance a one-time dividend payment to ByteDance investors and provide growth capital for the new entity.
Perplexity’s Growth Amid AI Boom
Perplexity AI, which began 2024 with a $500 million valuation and grew to $9 billion by year-end, has gained momentum amid rising interest in AI-powered search engines.
As a competitor to OpenAI and Google, Perplexity has drawn investor attention due to its potential to disrupt traditional online information access. However, the startup has also faced allegations of plagiarism, adding complexity to its public image.
This merger would allow Perplexity to leverage TikTok U.S.’s video platform capabilities while creating a simplified governance structure. It would also enable ByteDance to maintain equity stakes for most of its investors without fully divesting from TikTok U.S.
ByteDance has publicly stated its reluctance to sell TikTok U.S., but Perplexity views the proposed merger as a mutually beneficial alternative. By framing the deal as a partnership rather than a sale, Perplexity hopes to navigate political and regulatory pressures in the U.S.
The revised proposal comes as generative AI reshapes the tech landscape and amid ongoing scrutiny of TikTok’s operations in the U.S., with concerns over data privacy and national security.
Meanwhile, TikTok is on the brink of shutting down operations in the United States after the Supreme Court upheld a law banning the app unless its Chinese parent company, ByteDance, divests ownership.
