In an effort to win over regulators, Chinese billionaire Jack Ma plans to relinquish control of Ant Group Co.
Chinese internet tycoon Jack Ma intends to give up control of Ant Group, the finance behemoth closely linked to Alibaba, the e-commerce giant he established, according to a Thursday Wall Street Journal article. If implemented, the change would be another significant step in Ant’s reorganization and transfer of power since China postponed its $35 billion initial public offering over two years ago. Ant Group could not be reached for comment right away.
The world’s largest public listing at the time, Ant’s IPO was delayed by Chinese officials in November 2020, and they later forced Ant to go through a “rectification” procedure that would subject the company to the same financial laws that govern traditional banks. Up until that moment, Ant had been expanding rapidly under relatively lax regulatory conditions, much like many other Chinese internet companies. The corporation gave birth to several multibillion-dollar fintech companies, such as Alipay, which has a duopoly on the Chinese mobile payment industry with Tencent’s WeChat Pay, a money market fund that once grew to be the biggest in the world, and a successful microlending operation. The financial regulators in China urged Ant to “return to its roots in payments and bring more transparency to transactions; obtain the necessary licenses for its credit businesses and protect user data privacy; establish a financial holding company and ensure it has enough capital; revamp its credit, insurance, wealth management, and other financial businesses in accordance with the law; and step up compliance for its securities business.” Ant’s IPO ambitions don’t appear to be resuming any time soon. In June, the company denied a Bloomberg report that Chinese regulators were considering reviving its IPO as they relaxed their crackdown on the tech industry and stated that it “does not have any plan to initiate an IPO” and was instead “focused on steadily moving forward with our rectification work.” China’s securities laws prevent businesses from going public domestically if they have experienced a significant shift in shareholder composition over the previous two to three years. As a result, Ant must continue to boost the spirits of his staff members who have been holding onto their goods. According to Bloomberg, it had plans to provide personnel with interest-free loans last year. Not only Ant must stop a potential personnel outflow, but ByteDance, and other internet titans may also be impacted by China’s stricter regulations for businesses seeking offshore listings. Ant began as a payment processor for Alibaba, which Ma, who was then the CEO of the e-commerce company, spun out in 2011. The incident sparked a great deal of debate because it was claimed to have taken place without the knowledge of Alibaba shareholders Yahoo and SoftBank. Ma defended the choice by arguing that it was required to obtain a payments license to operate in China, which the business would not have gotten if it had foreign stockholders. A profit-sharing arrangement was subsequently established between the brothers, under which Ant would pay Alibaba “royalty and technical service fees” each quarter equal to 37.5% of its pre-tax profits, up until 2018, when Alibaba acquired 33.5% of Ant group. The two have a mutually beneficial relationship thanks to Ant’s Alipay app’s close integration with Alibaba’s retail services and the promotion of its financial services to business owners on Alibaba’s marketplaces. Ma established a partnership structure to ensure orderly transfer through generations and began making plans for his gradual withdrawal from Alibaba’s day-to-day operations nearly ten years ago. In 2013, he resigned as CEO of Alibaba, and in 2019, he retired as chairman. By 2020, the founder owned fewer than 5% of the enormous e-commerce company. Ma, though, continues to be Ant’s largest shareholder. According to the company’s 2020 IPO prospectus, the founder owned 50.52 percent of the company’s shares through a company he controlled.
The Wall Street Journal reported that as Ant prepared to change into a financial holding e-commerce company, it informed regulators of Ma’s intention to give up control. Regulators “gave their blessing” to the adjustment rather than requiring it. According to the article, Ma may be distributing his shares to other Ant executives like CEO Eric Jing.