Pentagon List Includes Tencent, Impacting Stock Value

Tencent, a major Chinese tech firm, has been added to the U.S. Department of Defense's (DOD) list of companies with ties to the Chinese military. This inclusion, stemming from a 2020 executive order, prohibits U.S. investors from engaging with designated Chinese military companies. The order's impact was immediate, previously leading to the delisting of several companies from the New York Stock Exchange.

The DOD's updated list, released January 7th, triggered a 6% drop in Tencent's stock value on January 6th, with analysts citing a direct correlation. Tencent, a global giant and the world's largest video game company by investment, vehemently denies being a military entity or supplier. In a statement to Bloomberg, Tencent affirmed its intention to collaborate with the DOD to clarify any misunderstandings.

This isn't the first time companies have been added or removed from the list. Several companies previously designated have since been removed after demonstrating they no longer met the criteria. At least two companies successfully petitioned the DOD for removal in recent years, suggesting a potential path for Tencent.

Tencent's extensive gaming portfolio, encompassing Tencent Games and significant stakes in companies like Epic Games, Riot Games, Techland, Don't Nod, Remedy Entertainment, FromSoftware, and Discord, underscores the significant financial implications of its inclusion on the list. Its market capitalization dwarfs that of its closest competitor, Sony, highlighting the potential impact on global markets. The company's future on the list and its resulting investment status in the U.S. remain to be seen.