Pentagon List Includes Tencent, Causing Stock Dip; Company Disputes Designation
Tencent, a Chinese tech giant, has been added to the U.S. Department of Defense's (DOD) list of companies with ties to the Chinese military, specifically the People's Liberation Army (PLA). This inclusion stems from a 2020 executive order by President Trump restricting U.S. investment in Chinese military entities. The listing immediately impacted Tencent's stock price, causing a significant drop.
The DOD list identifies companies believed to contribute to the PLA's modernization through technology, expertise, or research. While initially comprising 31 companies, the list has expanded since its inception, leading to delistings from the New York Stock Exchange in the past.
Tencent, in a statement to Bloomberg, vehemently denied being a military company or supplier. They asserted that the listing wouldn't directly affect their operations but expressed their intention to collaborate with the DOD to clarify any misunderstandings. This proactive approach mirrors past instances where companies successfully petitioned for removal from the list after demonstrating they no longer met the criteria.
The stock market reacted negatively to the announcement, with Tencent shares experiencing a 6% decline on January 6th and subsequent downward trends. Analysts attribute this to the listing's implications for U.S. investment. Given Tencent's global prominence – it's the world's largest video game company by investment and a major player overall – the impact of its inclusion on the list, and the potential loss of U.S. investment, could be substantial.
Tencent's vast portfolio extends beyond gaming. Through Tencent Games, its publishing arm, it operates a massive gaming business, but also holds significant stakes in numerous successful game studios, including Epic Games, Riot Games, Techland (Dying Light), Dontnod Entertainment (Life is Strange), Remedy Entertainment, and FromSoftware. It has also invested in companies like Discord.
