The market remains choppy heading into earnings, so it seems like a good time to talk about the first major piece of legislation that I can recall where the Government is proposing banning the use of a social media platform, specifically TikTok.

Montana became the first state to pass legislation banning TikTok on all personal devices.  If the governor signs the bill, it would take effect in January.  The proposed penalties are $10,000 per violation per day.  

To be fair, I haven’t read through the bill yet, but I’m curious to know how they plan on enforcing this, or how the app stores within Apple and Alphabet will restrict the downloads based on the state.  I suppose that could be done based on location monitoring.  

I understand banning access to TikTok on government-owned property, but this would be the first restriction on personal devices.  

The abridged version is U.S. officials have expressed fears that the Chinese government could potentially gain access to TikTok data through its links to its parent company, ByteDance, and that information would be used to benefit Chinese intelligence.

I’m not sure how many dancing dog videos China plans on using in a propaganda campaign, but I hope they use some of the ones I follow.

All kidding aside, this is an investment newsletter, and this could have real financial implications.  

What company could stand the benefit from banning TikTok if the trend continues?

The stock that could take market share away from TikTok is Snap Inc. (SNAP), the company behind Snapchat  The social media platform ended 2022 with 375 million daily active users, a 17% year-over-year increase.  The time spent on Snapchat’s Spotlight, their version of short-form videos similar to TikTok, more than doubled.  

The stock is at the lower end of the uptrend, with the potential to head up to $12, if not higher.  It may not come back to the $80 price tag it had before the meltdown in 2022, but I do like its history of sales growth.

The company does have earnings coming up on 4/27, so it’s perfectly acceptable to sit this one out and see what the results of their earnings are before looking at trades. But watch out if more states go after TikTok. Companies like SNAP will be ready to take on the extra ad dollars.

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