Ant Group’s founder Jack Ma will cede control of the Chinese fintech giant in a revamp that seeks to call a halt to a regulatory crackdown that started soon after its huge stock market debut was scuttled two years ago.
Ant’s $37 billion IPO, which would have been the world’s biggest, was suspended at the last minute in November 2020, resulting in a forced restructuring of the financial technology firm and speculation the Chinese billionaire would have to relinquish control.
While several analysts have said a giving up control could smooth the way for the company to relaunch its IPO, the changes disclosed by the group on Saturday, however, are likely to cause a further delay due to listing regulations.
China’s domestic A-share market demands that companies wait three years after a change in control to list. The wait is one year in Hong Kong, and two years in Shanghai’s Nasdaq-style STAR market.
A former English teacher, Ma previously had more than 50% of voting rights at Ant but the changes will mean that his share shrink to 6.2%, according to Reuters calculations.
Ma only holds a 10% stake in Ant, an affiliate of e-commerce giant Alibaba Group Holding Ltd (9988.HK), but has exerted control over the firm through related entities, according to Ant’s IPO prospectus filed with the exchanges in 2020.
Hangzhou Yunbo, an investment vehicle for Ma, had control over two other entities that hold a combined 50.5% stake in Ant, according to the prospectus.
Ma’s giving up of control comes as Ant is approaching the completion of its two-year regulatory-driven overhaul, with Chinese authorities ready to impose a penalty of more than $1 billion on the company, Reuters reported in November.
The expected penalty is part of Beijing’s extensive and unprecedented crackdown on the country’s technology giants over the past two years that has slashed hundreds of billions of dollars off their values and reduced revenues and profits.
But Chinese authorities have in recent months softened their tone on the tech crackdown amid efforts to shore up a $17-trillion economy that has been severely hurt by the COVID-19 pandemic. Duncan Clark, chairman of investment advisory firm BDA China, said:
“With the Chinese economy in a very febrile state, the government is looking to signal its commitment to growth, and the tech and private sectors are key to that as we know.”
“At least Ant investors can (now) have some timetable for an exit after a long period of uncertainty,” said Clark, who is also an author of a book on Alibaba and Ma.
Regulatory Scrutiny On Ant Group
Ant runs China’s ubiquitous mobile payment app Alipay, the world’s biggest, which serves over 1 billion users.
Ant, whose businesses also span insurance products distribution and consumer lending, said Ma and nine of its other top shareholders had decided to no longer act jointly when exercising voting rights, and would only vote independently.
It added that the shareholders’ economic interests in Ant will not change due to the adjustments. Ant also said it would add a fifth independent director to its board so that independent directors will consist of a majority of the company’s board. Currently, it has eight board directors.
“As a result, there will no longer be a situation where a direct or indirect shareholder will have sole or joint control over Ant Group,” it said in its statement.
Reuters reported in April 2021 that Ant was looking into options for Ma, one of China’s most successful and prominent businessmen, to divest his stake in Ant and cede control.
The Wall Street Journal reported in July 2022, referencing unnamed sources, that Ma could relinquish control by allocating some of his voting power to Ant officials including Chief Executive Officer Eric Jing.
Buy Crypto NowAnt’s market listing in Shanghai and Hong Kong was halted days after Ma publicly blasted regulators in a speech in October 2020. Since then, his sprawling empire has been under regulatory investigation and going through a revamp.
Once outspoken, Ma has mostly remained out of public view since the regulatory crackdown that has reined in the country’s technology titans and abolished a laissez-faire approach that caused breakneck growth. Andrew Collier, managing director of Orient Capital Research, said:
“Jack Ma’s departure from Ant Financial, a company he founded, shows the determination of the Chinese leadership to reduce the influence of large private investors. This trend will continue the erosion of the most productive parts of the Chinese economy.”
As Chinese regulators condemn monopolies and unfair competition, Alibaba and Ant have been untangling their operations from each other and independently pursuing new business, Reuters reported in 2022.
Ant said on Saturday that its management would no longer serve in the Alibaba Partnership a body that can appoint the bulk of the e-commerce giant’s board, confirming a change that began mid-last year.
