Pentagon List Includes Tencent, Impacting Stock Value

Tencent, a major Chinese technology company, has been added to the U.S. Department of Defense's (DOD) list of companies with ties to the Chinese military. This listing, stemming from a 2020 executive order, restricts U.S. investment in Chinese military-linked entities. The inclusion has led to a decline in Tencent's stock price.

The DOD's list, updated January 7th, identifies companies believed to contribute to the modernization of the People's Liberation Army (PLA) through technology, expertise, or research. While initially featuring 31 companies, the list has expanded since its inception. Past instances have resulted in delistings from the New York Stock Exchange.

Tencent, in a statement to Bloomberg, refuted its designation as a military company or supplier, asserting that the listing hasn't directly impacted its operations. However, the company plans to engage with the DOD to clarify any misunderstandings.

This situation mirrors past cases where companies successfully removed themselves from the list after working with the DOD. A similar outcome is anticipated for Tencent.

The announcement caused a significant dip in Tencent's stock value, dropping 6% on January 6th and experiencing further decline. Analysts link this decrease directly to its inclusion on the DOD's list. Given Tencent's global prominence – the world's largest video game company by investment and a major player overall – this development carries substantial financial implications.

Tencent's vast gaming portfolio, managed through Tencent Games, includes ownership stakes in numerous prominent studios such as Epic Games, Riot Games, Techland, Dontnod Entertainment, Remedy Entertainment, and FromSoftware. It also holds investments in other key industry players, including Discord. Its market capitalization significantly surpasses that of its closest competitor, Sony.