Alibaba founder Jack Ma attends 5th World Zhejiang Entrepreneurs Convening at Hangzhou International Expo Centre in Hangzhou, Zhejiang Province on November 13, 2019.
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Jack Ma, the founder of Ant Group will be giving up control over the Chinese fintech giant as part of an overhaul to try and draw a line under a regulatory crackdown which was initiated soon after the stock market’s mammoth debut two years ago.
Ant’s $37 billion IPO was cancelled in November 2020. It would have been the largest IPO ever. There was speculation that the Chinese billionaire would be forced to give up control.
Analysts have suggested that a surrender of control could allow the company to restart its IPO. However, the group announced Saturday’s changes which are likely to cause a delay in the listing process.
China’s A-share market requires that companies wait three years for their listing to be approved by the regulator. Shanghai’s Nasdaq-style STAR markets are open for two years, while Hong Kong is open for one year.
Ma, a former English teacher, used to have more than 50% voting rights at Ant. However, Reuters calculations show that his share will drop to 6.2%.
Ma only owns a 10% stake in Ant, an affiliate of e-commerce giant Alibaba Group Holding Ltd <9988.HK>, but has exercised control over the company through related entities, according to Ant’s IPO prospectus filed with the exchanges in 2020.
Hangzhou Yunbo, a Ma investment vehicle, controlled two other entities, which own a combined 50.5% of Ant, according to the prospectus.
Ma’s resignation comes as Ant nears the end of Ant’s two-year regulatory-driven restructuring. Chinese authorities are poised to impose a penalty of more than $1B on the firm, Reuters reported.
The punishment is part Beijing’s unprecedented crackdown over the past two-years on China’s tech giants. This has resulted in hundreds of billions of dollars being taken off their assets and reduced revenues.
However, Chinese authorities have been softening their tone about the tech crackdown over the COVID-19 epidemic.
“With China’s economy in a very fragile state, the government wants to signal its commitment for growth and the tech, private sector are key to that,” stated Duncan Clark, chairman, investment advisory firm BDA China.
Clark, an author on Alibaba and Ma, said that “at least Ant investors can now have a timetable for exit after a long period in uncertainty.”
Regulative scrutiny
Ant is the operator of China’s ubiquitous mobile payment application Alipay, the largest in the world and with more than 1,000,000 users.
Ant, whose businesses span insurance products distribution and consumer lending, announced that Ma and nine of its major shareholders had made an agreement not to continue acting in concert when exercising their voting rights. Instead, they would vote individually.
The adjustments will not affect the economic interests of shareholders in Ant, it said.
Ant also announced that Ant would add a fifth independent member to its board. Independent directors will now make up the majority of the company’s board. It currently has eight board Directors.
It stated in a statement that “There will not be a situation where an indirect or direct shareholder will have sole control or joint control over Ant Group.”
Reuters reported that Ant was looking into options for Ma (one of China’s most influential and successful businessmen) to sell his stake in Ant, and surrender control.
The Wall Street Journal reported last July, citing unnamed sources that Ma could hand over control by transferring some voting power to Ant officials, including Chief Executive Officer Eric Jing.
Ant’s Hong Kong market listing was halted in Shanghai and Hong Kong days after Ma publicly criticized regulators during a speech in Oct 2020. His sprawling empire has been under regulatory scrutiny since then and is currently undergoing a restructuring.
Ma, once a vocal figure, has mostly remained hidden since the crackdown on technology giants in the country and the end of the laissez-faire approach that drove rapid growth has ended.
Andrew Collier, managing Director of Orient Capital Research, stated that Jack Ma’s resignation from Ant Financial, a company he started, shows the determination and will of the Chinese leadership in order to lessen the influence of large investors.
“This trend will continue to the erosion of most productive parts the Chinese economy.”
According to Reuters, Ant and Alibaba are attempting to separate their operations and seek new business independently, as Chinese regulators have frowned on monopolies.
On Saturday, Ant announced that it would no longer be a member of the Alibaba Partnership. This body can nominate most of the board members at the e-commerce giant. It is a confirmation that a shift that began in mid-2013.