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This Is Why Fastly's Stock Is Falling Today

By Chris Neiger – Sep 2, 2020 at 11:33AM

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Fastly's biggest customer is facing more roadblocks to a potential sale.

What happened

Shares of Fastly (FSLY -0.39%), an edge computing and content delivery network company, were falling today as TikTok, Fastly's largest customer, is facing increasing hurdles to its potential sale.

Fastly's stock fell by as much as 8.5% during this morning's trading. As of 11:12 a.m. EDT, the company's shares were down 5.5%. 

So what 

TikTok is owned by Chinese internet company ByteDance, which is considering selling the social media app after the Trump administration threatened to shut down TikTok in the U.S. over national security concerns. TikTok is suing the U.S. government over the ban.

A red line graph on a black background.

Image source: Getty Images.

Fastly's stock fell today because potential TikTok bidders, which include Microsoft, Walmart, and Oracle, are unsure whether the Chinese government will allow the app's video algorithm to be sold along with the company. The Chinese government has restrictions on exporting artificial intelligence technology. 

With TikTok representing 12% of Fastly's top line, investors are worried that these government restrictions could delay the sale of the app. 

Now what 

Fastly investors may want to brace themselves for more uncertainty from TikTok's potential sale. It's not clear yet when TikTok will actually be sold, who the new owner will be, how long the deal will take to be finalized, or what technologies will be included in the sale. All of that means Fastly investors will have to deal with some of the drama being caused by the social media app's sale.

Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Chris Neiger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Fastly and Microsoft and recommends the following options: long January 2021 $85 calls on Microsoft and short January 2021 $115 calls on Microsoft. The Motley Fool has a disclosure policy.

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