While the official wording of Trump's ban on Tencent is unclear, video game companies, Tesla, Snap, and US professional sports leagues could be in trouble.
A ban with broad repercussions on large global companies
Did President Donald Trump just blow up the video game industry in the United States? Many have asked this question after Trump issued the executive order Thursday night banning "transactions" with the Chinese owners of the TikTok and WeChat apps starting September 20.
While the move against the owner of TikTok - Beijing-based Bytedance - came as no surprise, the action against the owner of WeChat, Shenzhen-based tech giant Tencent Holdings Inc., on the contrary, was.
This is because Tencent is one of the largest and most valuable companies in the world, with ownership stakes in numerous US video game companies, including Riot Games, which makes "League of Legends"; Epic Games, which produces "Fortnite"; and Activision Blizzard ATVI from the popular video game “World of Warcraft”.
Tencent also has significant stakes in Tesla Inc. TSLA and Snap Inc. SNAP the maker of Snapchat, and the Chinese company has streaming deals in place with NBA, NFL, and Major League Baseball. The order could potentially also affect Apple Inc.'s AAPL and Alphabet's GOOGL, which offer apps owned by Tencent.
Trader apprehensive about the effects on the markets
Trump's executive order has directly targeted WeChat, which has more than 1 billion users worldwide, and whose "data collection threatens to allow the Chinese Communist Party access to personal and proprietary information of Americans. ", Is reported among the reasons for the order.
But the wording of the order made it unclear whether the ban only affected WeChat or all of Tencent's holdings, saying, “any WeChat-related transaction by any person, or with respect to any property, subject to US jurisdiction, with Tencent Holdings Ltd.… Shenzhen, China or any subsidiary of such entity. "
In any case, the order is likely to be challenged in court. The Tencent shares 700 in Hong Kong sank on Friday after the announcement. The news emerged after the close of the extended trading session in the US, but traders will likely be keeping an eye on the performance of Tesla, Activision Blizzard and others in the coming days.
A ban on any business by US companies with WeChat's parent company - if so - could have far more far-reaching effects than Trump may have anticipated.
