Pentagon List Includes Tencent, Causing Stock Dip; Company Disputes Designation
Tencent, a leading Chinese technology conglomerate, 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 former President Trump restricting U.S. investment in Chinese military entities. The order mandates divestment from listed companies and prohibits new investments.
The DOD list identifies companies believed to contribute to PLA modernization through technology, expertise, or research. While initially comprising 31 companies, the list has expanded since its inception, leading to the delisting of some companies from the New York Stock Exchange.
Tencent's inclusion, announced on January 7th, prompted an immediate response. A Tencent spokesperson issued a statement to Bloomberg, asserting: "We are not a military company or supplier. Unlike sanctions or controls, this listing has no impact on our business. We will nonetheless work with the Department of Defense to address any misunderstanding."
This year, several companies previously listed have been removed after no longer meeting the designation criteria. Precedents exist of companies successfully collaborating with the DOD to achieve removal from the list, suggesting a similar strategy for Tencent.
The announcement caused a noticeable decline in Tencent's stock value. A 6% drop on January 6th, and subsequent downward trends, are attributed by analysts to its inclusion on the DOD list. Given Tencent's global prominence—the world's largest video game company by investment and a major player overall—this listing has significant potential financial repercussions.
Tencent's vast gaming empire, Tencent Games, dwarfs competitors like Sony. Beyond its publishing arm, Tencent holds stakes in numerous influential game studios, including Epic Games, Riot Games, Techland (Dying Light), Dontnod Entertainment (Life is Strange), Remedy Entertainment, and FromSoftware. It has also invested in numerous other developers and related companies such as Discord.
