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Monday, August 24, 2020 10:02:29 AM
By: TheStreet | August 24, 2020
• Tencent shares rose after the White House reportedly assured U.S. companies that a ban on the internet giant's WeChat app won't be broad as feared.
Tencent Holdings (TCEHY) shares were higher after the White House reportedly assured U.S. companies that a ban on the Shanghai internet giant's WeChat app won't be broad as originally feared.
The Trump administration is privately seeking to reassure U.S. companies including Apple (AAPL) that they can still do business with Tencent’s WeChat messaging app in China, Bloomberg reported.
As a result, the company's shares rallied 5.8% at the close in Hong Kong Monday, making them the best performer on the benchmark Hang Seng Index.
At last check Tencent American depositary receipts were up 5% at $69.55.
Senior administration officials have been contacting some companies, realizing that the impact of an all-out ban on the popular app could devastate U.S. technology, retail, gaming, telecommunications and other industries, people familiar with the matter told Bloomberg.
The ban had erased roughly $66 billion from Tencent’s value, Bloomberg said, though Monday's rebound means the stock has recouped all but $9 billion of those losses.
In addition to messaging and calls, WeChat serves as a platform for everything from payments and ride-hailing to productivity and e-commerce.
On Aug. 6 President Donald Trump signed an executive order saying that within 45 days, U.S. persons and companies will be barred from making "transactions" with WeChat ByteDance's TikTok.
Analyst Ming-Chi Kuo of TF International Securities estimated that in a worst-case scenario - in which WeChat is banned entirely from Apple's App Store, in every region - Apple's iPhone shipments could take a 25% to 30% hit.
China accounts for about 15% of Apple's overall revenue in a typical quarter, and wiping out WeChat could quash iPhone sales almost entirely in China and for other customers around the world who rely on WeChat. WeChat's monthly active user base is estimated at 1.2 billion worldwide.
Senior administration officials are deliberating over the scope of the ban ordered by Trump, Bloomberg said, and the president could ultimately overrule anything they decide.
Separately, a WeChat users group called U.S. WeChat Users Alliance, which says it isn’t affiliated with Tencent, on Friday sued the Trump administration, claiming the order is unconstitutional.
The lawsuit, filed in U.S. District Court in San Francisco, claims the ban violates WeChat users’ rights to free speech, due process and equal protection under law, and illegally targets Chinese-Americans, The Wall Street Journal quoted one of the alliance's attorneys as saying.
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