US search engine startup Perplexity AI has revised its merger proposal to TikTok’s Chinese parent, ByteDance, to form a new entity combining Perplexity and TikTok US, according to a source familiar with the matter.

The updated proposal suggests that the US government could own up to 50% of the new company following a future initial public offering (IPO), the source said.

A document shared by Perplexity with ByteDance and new investors outlined plans to create a US holding company named “NewCo.” Under the proposal, ByteDance would sell TikTok US to the investors, giving TikTok’s existing investors equity in the company. However, ByteDance would retain control of TikTok’s core recommendation algorithm.

The proposal specifies that the US government would hold up to half of the new company once it completes an IPO, valuing the entity at no less than $300 billion.

Perplexity AI also proposed that it could be acquired by the holding company, provided its investors receive a distribution of the NewCo equity.

TikTok services were restored last week after US President Donald Trump announced that he would allow the app to continue operating in the US following his return to power. TikTok had previously been blocked due to a national security law.

Neither ByteDance nor the White House immediately responded to Reuters’ request for comment. On Saturday, President Trump stated that he was in talks with several parties regarding a potential acquisition of TikTok and expected to make a decision on the app’s future within the next 30 days.

Earlier this month, it reported that Perplexity had submitted a bid to ByteDance to merge with TikTok US, proposing to combine the merged company with New Capital Partners. 

The source told reporters that Perplexity AI believes its proposal has a strong chance of success because it is structured as a merger rather than a sale.

Faridah Abdulkadiri

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