The proposal to TikTok’s parent company ByteDance includes the formation of a US holding company. Credit: XanderSt /Shutterstock.

AI search engine startup Perplexity AI has put forward a revised proposal for a merger with TikTok‘s US operations, reported Reuters.

According to a source, the search engine startup’s plan involves creating a new entity that would combine Perplexity and TikTok US, with the US government potentially owning up to 50% following an initial public offering (IPO), according to the person.

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The proposal, submitted earlier in January 2025, revises an earlier plan the AI startup presented to TikTok’s parent company, ByteDance, on January 18, one day before the TikTok ban law took effect on national security grounds.

The updated proposal to TikTok’s parent company ByteDance includes the formation of a US holding company named “NewCo.”

This would involve ByteDance selling TikTok US to investors, excluding TikTok’s core recommendation algorithm, which ByteDance intends to retain. The envisioned IPO for the new entity is expected to value it at a minimum of $300bn.

Perplexity AI has also indicated a willingness to be acquired by NewCo, provided its investors receive a distribution of NewCo equity.

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This move comes as TikTok services were reinstated in the US following President Donald Trump’s announcement to restore the app’s access, citing a potential resolution to the national security concerns that had led to its shutdown.

Posting on social media platform Truth Social, Trump earlier said: “I’m asking companies not to let TikTok stay dark! I will issue an executive order on Monday to extend the period of time before the law’s prohibitions take effect, so that we can make a deal to protect our national security.”

However, US President Trump mentioned ongoing discussions regarding TikTok’s future and anticipated a decision within the next 30 days.