Alibaba founder Jack Ma attends the 5th Zhejiang World Entrepreneurs Convention at the Hangzhou International Expo Center on November 13, 2019 in Hangzhou, Zhejiang Province, China.
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Ant Group founder Jack Ma will hand over control of the Chinese fintech giant in an overhaul that seeks to draw the line under a regulatory crackdown triggered after its mammoth stock market debut was scrapped two years ago.
Ant’s $37 billion IPO, which would have been the world’s largest, was canceled at the last minute in November 2020, prompting a forced restructuring of the financial technology company and speculation that the Chinese billionaire may have to relinquish control.
While some analysts have said the relinquishing of control can clear the way for the company to revive its IPO, the change announced by the group was, however, likely to result in a further delay due to listing regulations.
China’s domestic A-share market requires companies to wait three years after a change in control to list. Wait two years on the Nasdaq Shanghai-style STAR market, and one year in Hong Kong.
A former English teacher, Ma previously held more than 50% of Ant’s voting rights, but the change meant his stake fell to 6.2%, according to Reuters calculations.
Ma only owns a 10% stake in Ant, an affiliate of e-commerce giant Alibaba Group Holding Ltd <9988.HK>but has controlled the company through related entities, according to Ant’s IPO prospectus filed with the stock exchange in 2020.
Hangzhou Yunbo, the investment vehicle for Ma, has control through two other entities that own a combined 50.5% of Ant’s shares, the prospectus shows.
Ma’s control ceding comes as Ant is nearing the completion of a two-year regulatory-led restructuring, with Chinese authorities poised to impose a fine of more than $1 billion on the firm, Reuters reported in November.
The expected punishment is part of Beijing’s unprecedented crackdown on the country’s tech giants over the past two years that has sliced hundreds of billions of dollars from their value and slashed profits and losses.
But Chinese authorities have in recent months toned down the tech crackdown amid efforts to shore up the $17 trillion economy, which has been hit hard by the COVID-19 pandemic.
“With China’s economy in a very febrile state, the government is looking to signal its commitment to growth, and technology, the private sector is key to what we know,” said Duncan Clark, chairman of investment advisory firm BDA China.
“At least Ant investors can (now) have a timetable to exit after a period of uncertainty,” said Clark, who is also the author of a book on Alibaba and Ma.
regulatory oversight
Ant operates China’s ubiquitous mobile payment app, Alipay, the world’s largest, with more than 1 billion users.
Ant, whose business also deals in consumer debt and distribution of insurance products, said Ma and nine other major shareholders have agreed to no longer act when exercising voting rights, and will only vote independently.
He added that the economic interests of the shareholders in Ant will not change as a result of the adjustment.
Ant also said it will add five independent directors to its board so that independent directors will make up the majority of the company’s board. It currently has eight board directors.
“As a result, there will no longer be a situation where shareholders directly or indirectly have sole or joint control over Ant Group,” he said in the statement.
Reuters reported in April 2021 that Ant was exploring options for Ma, one of China’s most successful and influential businessmen, to divest his stake in Ant and cede control.
The Wall Street Journal reported in July last year, citing an unnamed source, that Ma may give up control by transferring some of the voting power to Ant officials including Chief Executive Officer Eric Jing.
Ant’s market listings in Hong Kong and Shanghai were removed days after Ma criticized regulators in a speech in October 2020. Since then, his sprawling empire has come under regulatory scrutiny and undergone restructuring.
Once outspoken, Ma has largely stayed out of public view since the regulatory crackdown that has reined in the country’s tech giants and has distanced itself from the laissez-faire approach that drove breakneck growth.
“Jack Ma’s departure from Ant Financial, the company he founded, shows the determination of the Chinese leadership to reduce the influence of large private investors,” said Andrew Collier, managing director of Orient Capital Research.
“This trend will continue the erosion of the most productive part of the Chinese economy.”
As Chinese regulators frown on monopolies and unfair competition, Ant and Alibaba have been untangling their operations from each other and independently looking for new business, Reuters reported last year.
Ant said that the Management will no longer serve in the Alibaba Partnership, the body that can nominate the majority of the e-commerce giant’s board, confirming the changes that began in the middle of last year.