President Donald Trump isn’t done targeting China just yet. Just days before he leaves office, his administration is adding 11 companies including smartphone giant Xiaomi (OTC: XIACF; HKEX: 01810) to a blacklist for alleged links to the Chinese military.
The blacklisting means that American investors will no longer be able to purchase securities and will be forced to divest their holdings of the targeted firms by November, according to the U.S. Department of Defense.
The news marks a tough blow for Xiaomi, which has just surpassed Apple (Nasdaq: AAPL) as the world’s third-largest smartphone maker. At the close of trading in Hong Kong Friday, shares of Xiaomi plummeted a record 10%, according to Bloomberg. Intraday in the U.S, Xiaomi was trading 6% lower at $3.66 per share.
Xiaomi denies the allegations and claims it does not have ties to the Chinese military.
“The Company reiterates that it provides products and services for civilian and commercial use," Xiaomi said.
Further, “The Company confirms that it is not owned, controlled or affiliated with the Chinese military, and is not a ‘Communist Chinese Military Company’ defined under the NDAA,”
Other firms included on the blacklist include Global Tone Communication Technology Co., Gowin Semiconductor Corp., as well as Luokong Technology (Nasdaq: LKCO).
Luokong, which provides location-based services, watched its shares tumble 15% by midday in New York. The company also denied that it has any affiliation to the Chinese military.
Trump has also targeted Chinese telecom giants China Telecom (HKEX: 00728), China Mobile Ltd. (HKEX: 00941), and China Unicom (HKEX: 00762), for alleged ties to the Chinese military. The New York Stock Exchange wound up delisting all three after some confusion on the matter.
It’s also important to note that the military blacklist is different from the Commerce Department’s entity list, which forbids American firms from doing business with tech giants including Huawei and Semiconductor Manufacturing (HKEX: 00981; OTC: SMICY) over national security concerns. Huawei was first blacklisted from the U.S. in May 2019. In the same month in 2020, the Trump administration extended that ban for another year.
According to Bloomberg, unless the ban on Xiaomi is reversed, the smartphone giant faces a possible delisting from U.S. exchanges, as well as removal from global benchmark indexes.