Founder of Ant Group Gives Up Control of Major Overhaul of Chinese Fintech Giant


Ant Group founder Jack Ma will relinquish control of the Chinese fintech giant in an overhaul that seeks to draw a line under a regulatory crackdown launched shortly after its mammoth stock market debut was cut short 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 relinquishing control could pave the way for the company to revive its IPO, the changes the group announced on Saturday are likely to result in a further delay due to listing regulations.

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China’s domestic A-share market requires companies to wait three years after a change of control to get on the list. The wait is two years on the Nasdaq-style STAR market in Shanghai and one year in Hong Kong.

Ma, a former English teacher, previously owned more than 50% of the voting rights in Ant, but the changes will see his share drop to 6.2%, according to Reuters calculations.

Ma only owns a 10% stake in Ant, a subsidiary of e-commerce giant Alibaba Group Holding Ltd., but has exercised control over the company through related entities, according to Ant’s IPO prospectus filed with the exchanges in 2020.

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Hangzhou Yunbo, an investment vehicle for Ma, controlled two other entities that together own a 50.5% stake in Ant, the prospectus revealed.

Ma’s transfer of control comes as Ant nears completion of its two-year regulatory-based restructuring, with Chinese authorities poised to fine the company more than $1 billion, Reuters reported in November.

The expected punishment is part of Beijing’s sweeping and unprecedented crackdown on the country’s tech giants over the past two years, which have cut hundreds of billions of dollars from their value and shrunk revenues and profits.

But Chinese authorities have softened their tone on the tech crackdown in recent months, amid efforts to prop up a $17 trillion economy hard hit by the COVID-19 pandemic.

“With China’s economy in a very fevered state, the government wants to signal its commitment to growth, and as we know, the tech, private sectors are key to that,” said Duncan Clark, chairman of investment consultancy BDA China.

“At least Ant investors (now) have a timetable for an exit after a long period of uncertainty,” says Clark, who has also written a book on Alibaba and Ma.

Regulatory investigation

Ant runs China’s ubiquitous mobile payment app, Alipay, the world’s largest, which has more than 1 billion users.

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Ant, whose business also spans consumer lending and distribution of insurance products, said Ma and nine of his other major shareholders had agreed to no longer act in concert when exercising voting rights, and would only vote independently.

It added that the shareholders’ economic interests in Ant will not change as a result of the adjustments.

Ant also said it would add a fifth independent director to its board so that independent directors will make up a majority of the company’s board of directors. It currently has eight board members.

“As a result, there will no longer be a situation where a direct or indirect shareholder has sole or joint control over Ant Group,” it said in its 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 relinquish control.

The Wall Street Journal reported last July, citing unnamed sources, that Ma could relinquish control by handing over some of his voting rights to Ant officials, including Chief Executive Officer Eric Jing.

Ant’s listing in Hong Kong and Shanghai derailed days after Ma publicly criticized regulators in an October 2020 speech. Since then, his sprawling empire has been subject to regulatory scrutiny and restructuring.

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Once outspoken, Ma has remained largely out of public view since the regulatory crackdown that has reined in the country’s tech giants and ended a laissez-faire approach that drove breakneck growth.

“Jack Ma’s departure from Ant Financial, a company he founded, demonstrates the determination of China’s leadership to reduce the influence of large private investors,” said Andrew Collier, general manager of Orient Capital Research.

“This trend will continue the erosion of the most productive parts of China’s economy.”

As Chinese regulators decry monopolies and unfair competition, Ant and Alibaba have separated their businesses and pursued new business independently, Reuters reported last year.

Ant said on Saturday that management would no longer serve on the Alibaba Partnership, a body that can nominate the majority of the e-commerce giant’s board, confirming a change that began midway through last year.

(Reporting by Yingzhi Yang and Brenda Goh in Shanghai and Kane Wu in Hong Kong; written by Sumeet Chatterjee; edited by William Mallard and Jacqueline Wong)

Photo: In this photo from Friday, October 23, 2020, an employee walks past a logo of the Ant Group at her office in Hong Kong. Photo credit: TBEN Photo/Kin Cheung.

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