Pentagon List Includes Tencent, Impacting Stock Value
Tencent, a major Chinese technology company, has been added to the US Department of Defense's list of companies with ties to the Chinese military. This designation, stemming from a 2020 executive order, restricts US investment in these entities. The inclusion on the list immediately impacted Tencent's stock price.
The DOD's list, initially comprising 31 companies, now includes Tencent and others believed to contribute to the People's Liberation Army's modernization through technology and expertise. The 2020 executive order previously led to the delisting of three companies from the New York Stock Exchange.
Tencent's statement to Bloomberg refutes the designation, asserting that it is neither a military company nor supplier. While claiming minimal business impact, Tencent expressed its intent to collaborate with the DOD to clarify the misunderstanding.
This isn't the first time companies have been added or removed from this list. Several companies have successfully had their names removed after demonstrating they no longer met the criteria. Tencent is likely pursuing a similar course of action.
The announcement caused a significant drop in Tencent's stock value, with a 6% decline on January 6th, and a continued downward trend. This correlation is widely acknowledged by financial experts. The implications are substantial, considering Tencent's global standing as the world's largest video game company by investment and a leading global corporation.
Tencent's gaming division, Tencent Games, is a dominant force in the industry, with a market capitalization far exceeding its nearest competitor, Sony. Its portfolio includes stakes in numerous prominent game studios, such as Epic Games, Riot Games, Techland, Dontnod Entertainment, Remedy Entertainment, and FromSoftware, along with investments in companies like Discord.
