Chinese tycoon Jack Ma is handing up control of Ant Group, which owns Alipay. The Alibaba-affiliated firm declared that it would terminate agreements that allowed Ma to maintain a dominating position within Ant Group’s corporate governance structure.
The entrepreneur formerly held more than half of Ant’s voting rights, despite not sitting on the company’s board of directors or being involved in day-to-day operations. Ma exerted power over Ant Group through several investment companies that held a combined 50.5% stake in the fintech giant.
Ant announced that going the future, Ma and nine other business leaders and staff members would be able to vote independently of one another. Once the business makes the measures it made over the weekend, according to reports, Ma would possess 6.2% of Ant Group shares.
The reform aims to put an end to the regulatory blitz that began as soon as its massive stock market debut was derailed two years ago.
Following news, the shares of listed Chinese companies with Ant Group as a significant stakeholder increased. Alibaba’s Hong Kong-listed shares increased by 7%.
Along with Longshine Technology Group Co Ltd, Jilin Zhengyuan, Shanghai Golden Bridge Infotech Co, Orbbec Inc, and Hundsun Technologies, all these companies saw an increase in share prices. Ant indirectly has holdings in those businesses ranging from little more than 5% to more than 20%.
Jack Ma’s this decision, according to Redmond Wong, Greater China market strategist at Saxo Markets, Hong Kong, will help reduce some uncertainty and open the door for the group’s business to grow and develop.
“It should have removed some of the authorities’ concerns about the group as the change was likely a negotiated outcome with the authorities. And investor sentiment towards the China internet sector is likely to improve further,” said Wong.
The rectification of the financial operations of 14 platform companies has “basically completed,” according to Guo Shuqing, head of China’s Banking and Insurance Regulatory Commission (CBIRC). However, there are still a few issues that need to be resolved.
Guo was cited as saying that the government will next implement “normalized regulation” and encourage platform businesses to operate in a compliant manner.
Ant’s $37 billion IPO, which would have been the world’s largest, was cancelled at the last minute in November 2020, forcing the financial technology giant to restructure and raising rumours that the Chinese billionaire would have to lose control.
Alexander Sirakov, managing partner at Aquariusx, a Shanghai-based investment consultancy, said, “Investors can stop guessing and can finally assign a risk premium to the new company that Ant was transformed to be.”
In a research note, Morgan Stanley stated that it would upgrade Alibaba to its “top pick” of companies in China’s internet industry in 2023, citing lessening regulation as one of the reasons for its decision.
While some analysts believe that giving up ownership could pave the way for Ant to relaunch its initial public offering (IPO), the adjustments made are likely to cause a further delay due to listing restrictions.
Companies must wait three years after a change in control before listing on China’s domestic A-share market. On Shanghai’s Nasdaq-style STAR market, the wait is two years, and in Hong Kong, it is one year.
However, Ant announced that it has no plans to go public.
In the latest step of its restructuring, the CBIRC approved a capital increase in Ant’s consumer lending unit to 18.5 billion yuan ($2.68 billion) from 8 billion yuan on December 30.
According to sources, Chinese regulators are planning to punish Ant Group more than $1 billion, perhaps putting an end to the fintech company’s two-year-long regulatory makeover.