Will Forced Sale of Major U.S. Gaming Assets Hurt Tencent?

We don't think so

Chelsey Tam 25 August, 2020 | 10:47AM

Given the escalation of the Sino-American technology war, we think the Trump administration's expansion of its ban to include not just the WeChat U.S. app but also Tencent's apps in the U.S. is the most probable scenario, which could affect up to 2% of Tencent's revenue. The next most likely option is to forbid Apple and Alphabet from offering downloads and updates of WeChat in their global app stores, excluding China. This could affect up to 5% of Tencent's revenue, in our view.

The expanded authority of the Committee on Foreign Investment in the United States to review certain noncontrolling foreign investments in a U.S. business that “maintains or collects sensitive personal data of United States citizens that may be exploited in a manner that threatens national security” could lead to a forced sale of Tencent’s ownership in Riot Games, Epic Games, and Supercell. By our estimates, this scenario is the third most probable but has the largest impact on Tencent's revenue at 6%. We believe the possibility of banning all U.S. companies from conducting business with Tencent both inside and outside of China is very unlikely because of the much larger impact on U.S. corporate interests.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Tencent Holdings Ltd67.10 USD-1.03

About Author

Chelsey Tam  Chelsey Tam is Equity Research Analyst for Morningstar

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