Published at : 08 Jan 2023 12:34 AM (IST)
An overhaul that seeks to draw a line under a regulatory crackdown that was triggered shortly after its mammoth stock market debut was thwarted two years ago will result in the founder of Ant Group, Jack Ma, giving up control of the Chinese fintech giant in order to make way for a new leadership team. Ant’s $37 billion initial public offering (IPO), which would have been the biggest in the world, was abruptly cancelled in November 2020, leading to a forced reorganisation of the financial technology company and rumours that the Chinese billionaire would have to surrender control of the company.
The modifications that were announced by the group on Saturday are likely to result in a further delay owing to the laws that govern listing due to the fact that some experts have said that a surrendering of power might open the way for the firm to resuscitate its initial public offering (IPO). Before being allowed to list on China’s domestic A-share market, corporations are required to wait three years following a change in ownership. On Shanghai’s Nasdaq-style STAR market, the waiting period is two years, but in Hong Kong it is just one year.
According to the estimates done by Reuters, the revisions will result in Ma’s stake in Ant falling to 6.2%. Ma is a former English teacher and formerly owned more than 50% of the voting rights at the company. According to the IPO prospectus that Ant filed with the markets in 2020, Ma only has a 10% share in Ant, a subsidiary of the e-commerce giant Alibaba Group Holding Ltd. However, according to the prospectus, Ma has exerted influence over the firm via affiliated organisations.
According to the prospectus, Ma’s investment vehicle, Hangzhou Yunbo, exercises control over two additional businesses that together own a stake in Ant that amounts to 50.5% of the company.
According to a report from Reuters in November, Ma is handing up leadership of the company just as Ant is getting close to completing its two-year regulatory-driven reorganisation. At that point, Chinese authorities are expected to slap a punishment on the company that is more than one billion dollars.
The anticipated punishment is a component of Beijing’s widespread and unprecedented crackdown on the country’s technological giants over the last two years, which has resulted in a reduction of hundreds of billions of dollars in company valuations as well as a reduction in income and profits. In spite of this, Chinese authorities have, over the last several months, taken a more relaxed stance with regard to their crackdown on the technology sector. This comes amid attempts to rebuild an economy worth $17 trillion that has been severely harmed by the COVID-19 epidemic.
Duncan Clark, head of investment consulting company BDA China, said that “with the Chinese economy in a highly feverish condition, the government is eager to express its commitment to development, and as we all know, the tech and private sectors are vital to that.” “At least Ant investors can (now) have some schedule for an exit after a long period of uncertainty,” said Clark, who is also the author of a book on Alibaba and Ma. “At least Ant investors can have some timetable for a departure after a long period of doubt.” Ant is the company that runs Alipay, the mobile payment service that dominates China and is the biggest in the world. It has more than a billion users.
Ant, whose businesses also include consumer lending and the distribution of insurance products, stated that Ma and nine of its other major shareholders had agreed to no longer act in concert when exercising voting rights and would only vote independently going forward. Ant’s businesses also include consumer lending and the distribution of insurance products. It was also stated that the economic interests of Ant’s shareholders would not be affected in any way by the changes that were made. Ant also said that it will increase the number of independent directors on its board by one, bringing the total number to five. This would make independent directors the majority of the board members at the business. There are presently eight directors serving on the board.
It was said in the company’s official release that “as a consequence of this, there will no longer be a scenario where a direct or indirect shareholder would have exclusive or joint control over Ant Group.” In April 2021, Reuters published an article stating that Ant was investigating several alternatives for Ma, one of China’s most successful and powerful businesspeople, to sell his interest in Ant and give up leadership of the company.
In July of the previous year, the Wall Street Journal claimed, citing anonymous sources, that Ma may give up control of Ant by delegating part of his voting authority to Ant employees such as Chief Executive Officer Eric Jing. A few days after Ma openly criticised authorities in a speech in October 2020, Ant’s market listing in Hong Kong and Shanghai was stalled. Since that time, the huge enterprise he controls has been the subject of regulatory scrutiny and is undergoing a restructure.
Since the regulatory crackdown that has reined in the country’s technological titans and done away with a laissez-faire strategy that fostered fast expansion, Ma has mainly concealed himself from public view. In the past, Ma was known for his outspokenness. According to Andrew Collier, managing director of Orient Capital Research, “Jack Ma’s resignation from Ant Financial, a firm he established, illustrates the resolve of the Chinese authorities to decrease the power of significant private investors.” Ant Financial is an online financial services provider.
“The most productive areas of the Chinese economy will continue to suffer as a direct result of this trend.”
According to a story from Reuters from last year, Ant and Alibaba have been untangling their operations from each other and individually pursuing new business in response to the disapproval of monopolies and unfair competition by Chinese government authorities. Confirming a shift that began in the middle of the previous year, Ant said on Saturday that its management will no longer participate in the Alibaba Partnership, which is a group that has the ability to propose the majority of the board members for the e-commerce behemoth.