Pentagon List Includes Tencent, Causing Stock Dip
Tencent, a major Chinese technology firm, has been added to the Pentagon's list of companies with ties to the Chinese military, specifically the People's Liberation Army (PLA). This action stems from a 2020 executive order by 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 comprising 31 companies, it has since expanded, leading to the delisting of several 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 has no operational impact. However, the company intends to collaborate with the DOD to resolve any misconceptions.
This situation echoes past instances where companies successfully petitioned for removal from the list after ceasing to meet the designation criteria. The stock market reacted negatively to the announcement, with Tencent shares experiencing a 6% drop on January 6th and continued downward pressure. Analysts link this decline directly to the DOD listing.
Tencent's Global Impact
The implications are significant given Tencent's global reach. As the world's largest video game company by investment, and a major player in various sectors, its inclusion on the list and potential exclusion from US investment markets could have far-reaching financial consequences.
Through Tencent Games, its publishing arm, Tencent operates a vast gaming empire. Its portfolio includes ownership stakes in prominent studios such as Epic Games, Riot Games, Techland (Dying Light), Don't Nod (Life is Strange), Remedy Entertainment, and FromSoftware. Furthermore, Tencent Games has invested in numerous other developers and related businesses, including Discord. The company's market capitalization dwarfs that of its closest competitor, Sony, by a significant margin.
