US Government: Tencent Linked to Chinese Military

Pentagon List Includes Tencent, Causing Stock Dip; Company Disputes Designation

Tencent, a major Chinese technology firm, has been added to the U.S. Department of Defense's list of companies with ties to the Chinese military (PLA). This follows a 2020 executive order by President Trump restricting U.S. investment in such entities. The inclusion on this list, which identifies companies believed to contribute to PLA modernization, immediately impacted Tencent's stock price.

Tencent's stock experienced a 6% drop on January 6th, with analysts linking this decline to the DOD's announcement. The company swiftly issued a statement via a spokesperson, denying its status as a military company or supplier and asserting that the listing hasn't affected its operations. Tencent indicated it will collaborate with the DOD to clarify any misunderstandings.

This DOD list, initially comprising 31 companies, has expanded since its inception. Conversely, some companies previously listed have been removed after demonstrating they no longer meet the criteria. At least two companies have successfully worked with the DOD to have their names removed, suggesting a potential path for Tencent.

The implications are significant. Tencent, a global gaming giant and one of the world's largest companies (with a market capitalization dwarfing that of competitors like Sony), faces potential limitations on US investment. Its gaming division, Tencent Games, operates globally, holding stakes in numerous prominent studios including Epic Games, Riot Games, Techland, Dontnod Entertainment, Remedy Entertainment, and FromSoftware, as well as investments in companies like Discord. The DOD listing could have far-reaching financial consequences.