Why investors should care about the fate of TikTok

What happens to TikTok isn’t just a question for its millions of American users.

The short-form video app, the latest flashpoint in tensions between the United States and China, is also of interest to investors. As the geopolitical conflict between the world’s two biggest economies intensifies, the fate of TikTok will send an important signal to businesses trying to figure out the consequences of a less globalized world.

What’s happening: Microsoft says it’s still discussing a potential purchase of TikTok, days after President Donald Trump said he would ban the popular app from operating in the United States, my CNN Business colleague Clare Duffy reports.

In a blog post Sunday, Microsoft said its CEO Satya Nadella talked with Trump about buying the app, which is owned by Chinese startup ByteDance. US policymakers have for weeks expressed concerns about the app, with many asserting it could pose a national security risk.

“[Microsoft] is committed to acquiring TikTok subject to a complete security review and providing proper economic benefits to the United States, including the United States Treasury,” the company said, adding that it will “move quickly” to talk with ByteDance “in a matter of weeks.”

The post suggests that TikTok could avert the ban that Trump threatened late Friday, when he said he could use emergency economic powers or an executive order to block the app from operating in the United States.

Microsoft would own and operate TikTok services in the country, as well as in Canada, Australia and New Zealand. The company’s shares rose more than 4% in early trading.

But the app’s future is far from certain. Trump’s position on TikTok isn’t set, while the South China Morning Post reported over the weekend that ByteDance may prefer to spin off TikTok instead of selling it. A British tabloid, The Sun, reported Monday that ByteDance is planning to move its headquarters from Beijing to London.

Why it matters: Decisions regarding TikTok hold significance for China’s other tech stars, like Tencent’s WeChat. US Secretary of State Mike Pompeo said Trump is due to “take action in the coming days” on Chinese apps.

They also highlight the increasingly tricky world global companies need to navigate as the relationship between Washington and Beijing deteriorates.

Noel Quinn, CEO of global bank HSBC said this Monday: “Current tensions between China and the US inevitably create challenging situations for an organization with HSBC’s footprint.”

7-Eleven owner scores $21 billion gas station deal

Marathon Petroleum is selling the Speedway chain of gas stations to the Japanese owner of 7-Eleven for $21 billion — giving the oil company an injection of cash as crude prices remain depressed.

Details, details: The two firms announced the deal late Sunday. It’s one of the biggest acquisitions since the coronavirus pandemic hit earlier this year, my CNN Business colleague Kaori Enjoji reports.

Japanese retail giant Seven & i Holdings — which owns 7-Eleven, supermarket chain Ito-Yokado and the Sogo and Seibu department stores — said the deal is the largest in the company’s history.

The Wall Street Journal reports that the two companies had been close to reaching an agreement earlier this year, but talks fell apart due to Covid-19.

Big picture: 7-Eleven will expand its presence in the United States at a time when car travel is expected to increase due to Covid-19. But shares of Seven & i fell more than 5.5% on Monday as investors balked at the steep price tag.

Shares of Marathon, which reports earnings Monday, rose more than 8% in premarket trading.

Watch this space: Marathon’s stock has dropped more than 36% this year alongside weak demand for crude. US oil prices are struggling to stay above $40 per barrel as the outlook remains uncertain.

That could keep the industry deal count growing. Last month, Berkshire Hathaway agreed to purchase natural gas assets from Dominion Energy in a deal worth nearly $10 billion, including debt, while Chevron scooped up Noble Energy for $5 billion.

The risk of keeping schools closed

While reopening schools during a pandemic poses big risks, the economic cost of keeping classrooms empty is “substantial,” according to new research from Goldman Sachs.

In a note to clients Sunday, the investment bank estimated that shutdowns in the US education sector accounted for more than two percentage points of the record 32.9% annualized contraction in the economy last quarter.

Job cuts in the industry, meanwhile, contributed to the loss of about 1.2 million positions in March and April. While employment for teachers is back to pre-pandemic levels, the recovery has been much slower for lower-skilled workers such as lunch staff and custodial workers.

Ongoing closures could also result in a large number of Americans leaving work in order to care for at-home children, per Goldman. Roughly 30% of the pre-pandemic labor force had children at home, the bank estimated.

Still, strategists David Choi and Joseph Briggs acknowledged that opening schools in some states could be even more damaging, leaving local officials to navigate a complex matrix of decisions.

“While there are large costs to school closures, many states remain at very high levels of new cases per day, and these states face a much higher risk if they reopen schools early,” they said.

Up next

Hyatt and Virgin Galactic report earnings after US markets close. Disney results arrive tomorrow.