Perplexity AI has revised its proposal for merging with TikTok’s U.S. operations, a move that could grant the U.S. government up to a 50% stake in the new entity. The updated proposal, shared with ByteDance, TikTok’s parent company, and potential investors, outlines the creation of a new U.S.-based holding company, “NewCo.”
This company would combine Perplexity AI and TikTok U.S., excluding TikTok’s core recommendation algorithm. The plan suggests ByteDance’s investors retain equity stakes in NewCo, while Perplexity AI’s investors receive a similar distribution.
The merger would rely on funding from third-party capital providers to support ByteDance investors with a one-time dividend payment and to fuel NewCo’s growth.
Sources indicate that the U.S. government’s stake would materialize post-NewCo’s IPO, which could exceed a $300 billion valuation. The merger proposal values TikTok U.S. at a minimum of $50 billion, though the final price depends on ByteDance investors’ decisions to either cash out or remain part of NewCo.
Perplexity AI, a generative AI startup specializing in AI-assisted search, saw its valuation skyrocket from $500 million in early 2024 to $9 billion by the year’s end, driven by strong investor interest.
Its growth reflects a broader generative AI boom, with competitors like OpenAI and Google also innovating in AI-powered search and content delivery. The merger could introduce more video features to Perplexity’s platform while addressing security concerns surrounding TikTok’s operations in the U.S.
Although ByteDance has previously resisted selling TikTok U.S., Perplexity AI views its merger proposal as viable since it doesn’t constitute a sale.
