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 previous delistings from the New York Stock Exchange.

Tencent's appearance on the latest iteration of the list, released 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 DOD list has seen previous removals of companies no longer meeting the designation criteria. At least two companies have successfully collaborated with the DOD to have their names removed, suggesting a potential path for Tencent.

The list's release correlated with a significant drop in Tencent's stock value. A 6% decline on January 6th, followed by a slight downward trend, highlights the market's reaction. Given Tencent's global prominence – the world's largest video game company by investment and a major player overall – its inclusion carries substantial financial implications for U.S. investment.

Tencent's gaming division, Tencent Games, operates as a major publisher and investor. Its portfolio boasts significant stakes in renowned studios such as Epic Games, Riot Games, Techland (Dying Light), Don't Nod (Life is Strange), Remedy Entertainment, and FromSoftware, along with investments in numerous other developers and companies like Discord.