Perplexity AI proposes merger with TikTok, offering U.S. government a 50% stake, source says

Search engine startup Perplexity AI has updated its merger proposal to TikTok's parent company, ByteDance, aiming to combine Perplexity with TikTok’s U.S. operations, a source familiar with the matter told Reuters on Sunday.

The revised proposal outlines the creation of a new U.S. holding company, "NewCo," which would manage the merged entities. Under the plan, ByteDance would sell TikTok U.S. to investors, granting TikTok’s existing stakeholders equity in NewCo.

The U.S. government would hold up to a 50% stake in the new company after a future initial public offering (IPO) with a minimum valuation of $300 billion, the source said. ByteDance would retain TikTok's core recommendation algorithm.

Perplexity AI also offered to be acquired by the new entity, provided its investors receive equity distributions in NewCo. CNBC first reported details of the merger proposal.

TikTok services in the U.S. were restored last week after President Donald Trump, following his return to power, lifted the ban on the app, which was previously blocked under national security concerns. ByteDance and the White House have yet to respond to Reuters' requests for comment.

President Trump stated on Saturday that he is engaging with multiple parties over the future of TikTok and expects a decision within 30 days. Earlier this month, Reuters reported that Perplexity AI had submitted an initial bid to ByteDance proposing a merger rather than a direct sale, which the company believes could increase the likelihood of the deal’s success.

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