ByteDance, the parent company of TikTok, is reportedly considering shutting down the popular video-sharing app rather than selling it in the face of potential legislation to ban the platform from app stores in the United States. According to Reuters, four sources close to ByteDance have revealed that the company would exhaust all legal options before resorting to a shutdown.

The sources explained that the algorithms used by TikTok are considered essential to ByteDance's overall operations, making a sale of the app with its algorithms highly improbable. Despite accounting for a small share of ByteDance's total revenues and daily active users, the company would prefer to close the app in the US rather than selling it to a potential American buyer.

Shutting down TikTok in the US would have limited impact on ByteDance's business, allowing the company to retain control over its core algorithm. The sources, who spoke on the condition of anonymity, also highlighted that ByteDance does not publicly disclose its financial performance or the financial details of any of its units.

ByteDance's financial success primarily stems from its operations in China, mainly through other apps such as Douyin, the Chinese equivalent of TikTok. One source with direct knowledge mentioned that the US accounted for approximately 25% of TikTok's overall revenues last year.

The recent ban threat in the US comes as a result of concerns among US lawmakers that China could access Americans' data or potentially use the app for surveillance. President Joe Biden signed legislation into law, setting a deadline of January 19 for a sale. However, Biden has the authority to extend the deadline by three months should he determine that ByteDance is making progress in addressing security concerns.

The sources further revealed that TikTok shares core algorithms with ByteDance's domestic apps, such as Douyin. These algorithms are highly esteemed, even surpassing those of competitors like Tencent and Xiaohongshu. Disentangling TikTok from ByteDance would be a complicated endeavor, as the intellectual property licensing of the algorithms is registered under ByteDance in China.

Moreover, the sources emphasized that ByteDance would not agree to sell its valuable asset, the TikTok algorithm, to its rivals. The algorithm is considered ByteDance's "secret source," making it one of the company's most significant assets.

In 2020, the Trump administration attempted to ban TikTok and WeChat, but these efforts were blocked by the courts. Since then, TikTok has faced partial and attempted bans in several countries, including the United States.

China has also voiced opposition to any forced divestment of the TikTok app. A spokeswoman for the Ministry of Commerce stated earlier this year that China would firmly oppose such a sale, citing the need for administrative licensing procedures in accordance with Chinese laws and regulations.

ByteDance, backed by notable investors such as Sequoia Capital, Susquehanna International Group, KKR & Co, and General Atlantic, was valued at $268 billion in December 2022. The company recently offered to buy back approximately $5 billion worth of shares from investors.

In response to the ban threat, TikTok CEO Shou Zi Chew expressed confidence in winning the legal challenge to block the legislation. Chew stated that the app is widely used by 170 million Americans and expects a positive outcome to preserve TikTok's presence in the US market.

ByteDance declined to comment on the reports.