This is a ‘nightmare scenario for Zuckerberg and Facebook’: Dan Ives

Wedbush Securities Managing Director Dan Ives joins Yahoo Finance’s Kristin Myers to break down the pros and cons of Microsoft’s possible acquisition of TikTok, and what it could mean for Big Tech.

Video Transcript

KRISTIN MYERS: Microsoft, which we will be chatting now, down almost 2%. This, of course, is after the news that they might be acquiring the social media platform TikTok. They might be under American ownership soon if Microsoft purchases them.

So for more on that, we're joined now by Dan Ives. He's the Wedbush Securities Managing Director. Dan, thank you so much for joining us amid a tropical storm.

DAN IVES: Good to be here. Thanks.

KRISTIN MYERS: So we've been hearing that Microsoft is going to try and snap up TikTok. We've also heard, of course, rumors about Apple. I mean, why does Microsoft-- or does Microsoft make the most sense as the company to take them on? They have no social media platforms, unless you're counting LinkedIn.

DAN IVES: Well, right now, for Microsoft, it essentially fell into their lap. I mean, I would go on to say Christmas morning came early for Microsoft and shareholders. You get a TikTok.

If you look at it given, the September 15 deadline from the White House, there's only one technology company out there that can buy TikTok. And the other FAANGians are up to their eyeballs in regulatory issues. And that's why right now, this is a game a high-stakes poker. And Microsoft's holding the cards with ByteDance's back against the wall.

KRISTIN MYERS: So TikTok is huge right now. I don't have the platform myself, but I know most teens do right now. So, I mean, what is at stake here? And what do you think this is going to mean for Microsoft going forward if they do manage to acquire TikTok?

DAN IVES: Well, for Microsoft-- and it's really, if you look at Nadella's strategies, the CEO, it's all been about cloud and enterprise. And that's why I believe it is a company on a trajectory to hit $2 trillion by year end. So mark that.

But the consumer strategy, this goes back to the failed bid for Yahoo, Skype, and you look at some of their other issues in terms of Nokia. Consumer strategy has been on a treadmill. And this really would give them a major, major horse in the race, a thoroughbred in terms of TikTok.

100 million users-- I think you can get to 400 to 500 million users in the next two to three years. And if they got this for $35 to $40 billion, I think when we look out three years from now, it's worth $200 billion. So that's why it would be a coup for Microsoft to get this. I believe it's 75% to 80% chance the deal gets done.

KRISTIN MYERS: So more to that point on that horse race, right, we're seeing Facebook down about a percentage point right now. What do you think happens between Microsoft and Facebook if Microsoft can get a company like TikTok under its belt?

DAN IVES: A nightmare scenario for Zuckerberg and Facebook is Microsoft acquiring TikTok, especially going after the Instagram. If you look at Microsoft, given that distribution marketing and what they have under the hood in Redmond, I believe this would be just another sort of linchpin to what TikTok could accomplish, going after front-and-center when you look at Facebook and Instagram.

But right now, you look at every other FAANG tech stalwart, they know that they have a bright spotlight from the beltway, as well as in the EU. So there's only one technology company that has the treasure chest, $136 billion, and would want an asset like this. And that's why right now ByteDance is essentially at the prom. And they don't even want to be there. But there's only one dance partner. It's Microsoft.

KRISTIN MYERS: So I want to ask you about the push from the president. We were just talking about this in the last hour. One, there is this deadline, so the push to make this a very quick sale.

But also this part about giving a piece, essentially, to the US government. I mean, that seems incredibly unusual. What's your thoughts on that?

DAN IVES: Look, I think that would be very noisy if that happened, right? So I think ultimately, in our opinion, likely that does not happen. The most important thing is that they ultimately get [INAUDIBLE] to get to the table and sell TikTok by September 15.

Otherwise, there's more trouble ahead head from a TikTok perspective if September 15 comes. They walk away, they're looking in a dark alley in terms of pulling the plug.

KRISTIN MYERS: So that's not the only bit of noise. We also got China coming out and saying that the US is essentially trying to do, quote, a smash and grab of TikTok. I mean, what's your response to that? It just seems as if every other week we're getting a new headline out of the US and China ratcheting up tensions. Of course, we have no trade deal in sight.

DAN IVES: Well, good to call it like it is. This is essentially an arranged marriage for TikTok to Microsoft. And there's obviously frustration from a ByteDance perspective. But the reality is that you talk about $40, $45 billion, maybe potentially lower in terms of what Microsoft could get this at. If ByteDance played the game of high-stakes poker and walks away and they pull the plug September 15, the asset's worth 60% to 70% less that minute.

So that's why right now this is all a game of poker. But when it comes down to it, I think it's just a matter of when the deal gets announced, the price, and making sure the technology issues are resolved, as well as those are greenlighted from the White House.

KRISTIN MYERS: All right, well, we'll have to leave that there. Dan Ives, Managing Director at Wedbush Securities, thanks so much for joining us in the storm today.

DAN IVES: Thank you.