Updated: Oct 16, 2020
Oracle Corp. is a massive blue-chip cloud computing and software company. However they have shown no previous interest in social media companies prior to their bid for TikTok. To the average investor, Microsoft looked to be the ideal suitor for TikTok as they already operate the professional social networking site, LinkedIn. TikTok would have been the Yin to LinkedIn's Yang, yet TikTok's China-based parent company ByteDance Ltd. rejected Microsoft's proposal.
The details of the deal are still largely unknown, however, a spokesperson for Oracle suggested the deal was more of a "strategic partnership" than an acquisition. Oracle's shares surged upward 4% yesterday morning as the news of the deal was announced.
Investors are still waiting for the exact terms of the deal to be released sometime in the upcoming weeks. Any price movement surrounding Oracle Corp. (ORCL - NYSE) is speculative, because the details of the supposed partnership are yet to be announced. The surge of Oracle shares can likely be attributed to short-term traders looking to capitalize on big price fluctuations, however, the institutions and long-term investors will refuse to move in on Oracle until the terms of the partnership are announced.
Look for news regarding the partnership, here are the kinds of points that will cause the stock price to go up or down:
Up - TikTok's cloud storage and data analysis processes handled by Oracle. This will drive Oracle's price upward as TikTok would potentially become Oracle's largest client.
Up - Oracle encourages US regulatory oversight to decrease political tensions between US and China regarding data collection
Down - Oracle's standing in the partnership does not allow for digital advertising opportunities thereby limiting its cloud business.
Down - TikTok becomes non compliant with US oversight and political tensions increase
Ideally, an acquisition would have been most favorable for investors looking to capitalize on TikTok's impressive growth. The supposed partnership leaves details to be haggled over as the deal finalizes. More price fluctuations are in Oracle's future as long term investors await the full unveiling of the partnership. However, if I'm planning to trade Oracle stock in the short-term, I would buy in now.