Pentagon List Includes Tencent, Impacting Stock Value
Tencent, a major Chinese technology firm, has been added to the US Department of Defense's list of companies with ties to the Chinese military (PLA). This designation stems from a 2020 executive order by President Trump restricting US investment in Chinese military entities. The order mandates divestment from listed companies and prevents further US investment.
The DOD list identifies companies believed to contribute to PLA modernization through technology, expertise, or research. While initially comprising 31 companies, the list has expanded since its inception, leading to the delisting of several companies from the New York Stock Exchange. Tencent's inclusion in the latest update, released January 7th, caused a significant market reaction.
Tencent's Response
Tencent swiftly refuted the designation, stating through a spokesperson to Bloomberg that it is neither a military company nor a supplier. While claiming minimal immediate business impact, Tencent indicated a willingness to cooperate with the DOD to clarify any misunderstandings. This proactive approach mirrors successful efforts by other companies in the past to have their names removed from the list after demonstrating they no longer meet the criteria.
Market Impact and Tencent's Global Reach
The announcement triggered a 6% drop in Tencent's stock value on January 6th, with subsequent downward trends attributed to its inclusion on the DOD list. This is noteworthy given Tencent's global prominence – it's the world's largest gaming company by investment and a leading global technology firm. Its potential exclusion from US investment markets holds substantial financial ramifications.
Tencent's extensive gaming portfolio, managed through Tencent Games, includes ownership stakes in numerous prominent studios such as Epic Games, Riot Games, Techland, Don’t Nod, Remedy Entertainment, and FromSoftware. The company has also invested in numerous other developers and related businesses, including Discord. Its market capitalization significantly surpasses that of its closest competitor, Sony.
