Pentagon List Includes Tencent, Impacting Stock Value
Tencent, a Chinese tech giant, has been added to the Pentagon's list of companies with ties to the Chinese military, specifically the People's Liberation Army (PLA). This designation stems from a 2020 executive order by former President Trump restricting US investment in Chinese military entities. The order mandates divestment from these companies, which are believed to contribute to PLA modernization through technology, expertise, and research.
The Department of Defense (DOD) maintains and updates this list. While initially containing 31 companies, it has since expanded, leading to the delisting of some companies from the New York Stock Exchange. Tencent's inclusion in the latest DOD update, released January 7th, prompted an immediate response.
Tencent's Response
Tencent issued a statement to Bloomberg, clarifying that it is "not a military company or supplier," and asserting that the listing doesn't directly impact its operations. However, the company intends to collaborate with the DOD to resolve any misunderstandings. This proactive approach mirrors that of other companies successfully removed from the list in previous years by engaging with the DOD.
Market Reaction and Implications
The DOD's announcement caused a significant drop in Tencent's stock price. A 6% decline on January 6th, followed by further downward trends, suggests a direct correlation between the listing and investor concerns. Given Tencent's global prominence – it's the world's largest video game company by investment and a major player overall – its inclusion on the list carries substantial financial implications for the company and the US investment market.
Tencent's vast gaming empire, Tencent Games, operates through a publishing division and boasts significant ownership stakes in numerous successful game studios, including Epic Games, Riot Games, Techland, Don't Nod, Remedy Entertainment, and FromSoftware. It has also invested in many other prominent developers and related businesses, such as Discord. The potential for restricted US investment could significantly impact Tencent's future growth and global operations.
