Chinese corporation Tencent has announced that it will fight its inclusion in the list of Chinese military companies decided by the US Department of Defense. Earlier this week, the news caused a significant drop (around 10%) in the company's stock.
Tencent is seeking a negotiation with the US Department of Defense but may also initiate a lawsuit if it cannot reach an agreement. Here's the full official statement:
As the Company is neither a Chinese military company nor a military-civil fusion contributor to the Chinese defense industrial base, it believes that its inclusion in the CMC List is a mistake. Unlike other lists maintained by the U.S. Government for sanctions or export control measures, inclusion in the CMC List relates only to U.S. defense procurement, which does not affect the business of the Group.
The CMC List is also distinct from the Non-SDN Chinese Military-Industrial Complex List (NS-CMIC List) maintained by the U.S. Office of Foreign Assets Control, and inclusion in the CMC List will not prohibit any persons (other than the Department of Defense) from business dealings with the Company, including transacting in the securities of the Company.
The Company intends to initiate a Reconsideration Process to correct this mistake. During the process, it will engage in discussions with the U.S. Department of Defense to resolve any misunderstanding, and if necessary, will undertake legal proceedings to remove the Company from the CMC List.
Tencent offers various online products and services in China, like the messaging apps Tencent QQ and WeChat, though it is perhaps best known in the Western world for its gaming division. For a while now, it's been the largest gaming publisher in the world by revenue, well ahead of Sony and Microsoft, although the latter has reduced the gap following the acquisition of Activision Blizzard.
Tencent also invested heavily in game studios located outside China. It owns Riot Games, Funcom, Sharkmob, Sumo Group, Grinding Gear Games, and Leyou (owner of Athlon Games, Splash Damage, and Digital Extremes). It also holds majority stakes in Turtle Rock Studios, Techland, Tequila Works, Klei Entertainment, Fulqrum Publishing (previously known as 1C Entertainment), Wake Up Interactive, Inflexion Games, 10 Chambers Collective, Yager Development, Fatshark, Miniclip and Supercell, as well as minority stakes in Don't Nod, Shift Up, Epic Games, Bloober Team, Marvelous, FromSoftware, Remedy, Krafton, Kakao, Paradox Interactive, Frontier Developments, and Ubisoft.
Rumors about the potential acquisition of the latter company have intensified lately. Just yesterday, Ubisoft appointed advisors to review potential sale options. A couple of years ago, Tencent reportedly shifted its M&A (mergers and acquisitions) strategy to majority deals only.
About the author: With over two decades of experience in gaming journalism, Alessio Palumbo has led the gaming vertical at Wccftech since August 2015. He started working at a young age for Italian websites like Everyeye.it, Gamestar.it, Nextgame.it, and Multiplayer.it before kickstarting the indie English-language publication Worlds Factory as its founder and Editor in Chief. In the last decade, he has coordinated the overall output of Wccftech's gaming section, managed PR relations, assigned reviews, produced daily news coverage, edited gaming content as needed, and delivered game reviews. Arguably, his trademark content is the long series of exclusive developer interviews that have been cited by Wikipedia and by the biggest news media and gaming publications. His passion for technology also makes him knowledgeable when it comes to gaming hardware and tech. His favorite genres include RPGs, MMORPGs, and action/adventure games.
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