Shares of Tencent have plunged by as much as 46% after President Donald Trump signed an executive order banning WeChat from operating in the United States.
The US administration’s decision to target the internet giant in tandem with a previously rumored TikTok ban sent shockwaves through Chinese markets, erasing $46 billion of Tencent’s market value and bringing the yuan to its lowest point in two weeks.
The impact was somewhat lessened after a US official clarified the current ban covers only the company’s WeChat app. The stock managed to pare losses to 4.3%, but fear remains that the executive order could expand to apply to Tencent’s business relationships with some of America’s largest corporations.
As the world’s biggest game publisher, Tencent holds a 40% stake in Epic Games along with a 5% stake in Activision Blizzard and Ubisoft. The company owns Riot Games, the maker of League of Legends and Valorant, and has an 80% stake in Grinding Gear Games as well as other large holdings in numerous mobile games.
Tencent also holds substantial stakes in Spotify, Reddit, Tesla, Warner Music, and Universal Music. It has streaming deals in place with the NBA, the NFL, and Major League Baseball. Any expansion of the WeChat ban could have consequences that reach far beyond the gaming industry.
“The US government is expected to follow up with more measures targeting Tencent,” said Steven Leung, executive director at Singapore brokerage house UOB Kay Hian. “Tencent’s overseas expansion map now looks a bit uncertain, since some M&A deals, especially if its targets are based in the US, will face challenges.”
The addition of an executive order banning WeChat along with the one targeting TikTok took many by surprise, with Eurasia Group analyst Paul Triolo saying that the orders represent a “major escalation on the US side of the confrontation with China over the use of technology.” Triolo says the bans “mark the first time the US government has attempted to ban a software application running on millions of mobile phones within the US.”
Issued Thursday, the executive orders take effect in 45 days. They call on the Commerce Secretary to define the bans formally, possibly barring the popular apps from the Apple and Google app stores and effectively removing them from US distribution.