Ant Group founder Jack Ma to give up control in major overhaul

Mr Jack Ma previously possessed more than 50 per cent of voting rights at Ant. PHOTO: REUTERS

SHANGHAI – Ant Group founder Jack Ma will give up control of the Chinese fintech giant in an overhaul that seeks to draw a line under a regulatory crackdown that was triggered soon after its mammoth stock market debut was scuppered two years ago.

Ant’s US$37 billion (S$49.5 billion) initial public offering (IPO), which would have been the world’s largest, was cancelled at the last minute in November 2020, leading to a forced restructuring of the financial technology firm and speculation that the Chinese billionaire would have to cede control. 

While some analysts have said a relinquishing of control could clear the way for the company to revive its IPO, the changes announced by the group on Saturday, however, are 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. The wait is two years on Shanghai’s Nasdaq-style Star market, and one year in Hong Kong. 

A former English teacher, Mr Ma previously possessed more than 50 per cent of voting rights at Ant but the changes will mean that his share falls to 6.2 per cent, according to Reuters calculations. 

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

Hangzhou Yunbo, an investment vehicle for Mr Ma, had control over two other entities that own a combined 50.5 per cent stake of Ant, the prospectus showed.

Mr Ma’s ceding of control comes as Ant is nearing the completion of its two-year regulatory-driven restructuring, with the Chinese authorities poised to impose a fine of more than US$1 billion on the firm, Reuters reported in November. 

The expected penalty is part of Beijing’s sweeping and unprecedented crackdown on the country’s technology titans over the past two years that has sliced hundreds of billions of dollars off their values and shrunk revenues and profits. 

But the Chinese authorities have in recent months softened their tone on the tech crackdown amid efforts to bolster a US$17 trillion economy that has been badly hurt by the Covid-19 pandemic.

“With the Chinese economy in a very febrile state, the government is looking to signal its commitment to growth, and the tech, private sectors are key to that as we know,” said Mr Duncan Clark, chairman of investment advisory firm BDA China. 

“At least Ant investors can (now) have some timetable for an exit after a long period of uncertainty,” said Mr Clark, who is also an author of a book on Alibaba and Mr Ma.

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

The group, whose businesses also span consumer lending and insurance products distribution, said Mr Ma and nine of its other major shareholders had agreed to no longer act in concert when exercising voting rights, and would vote only 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 comprise a majority of the company’s board. It currently has eight board directors.

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

Reuters reported in April 2021 that Ant was exploring options for Mr Ma to divest his stake in the group and give up control.

The Wall Street Journal reported in July 2022, citing unnamed sources, that Mr Ma could cede control by transferring some of his voting power to Ant officials including chief executive Eric Jing.

Ant’s market listing in Hong Kong and Shanghai was derailed days after Mr Ma publicly criticised regulators in a speech in October 2020. Since then, his sprawling empire has been under regulatory scrutiny and going through a restructuring.

Once outspoken, Mr Ma has kept an extremely low public profile in the past two years as regulators reined in the country’s tech giants and did away with a laissez-faire approach that drove breakneck growth.

“Jack Ma’s departure from Ant Financial, a company he founded, shows the determination of the Chinese leadership to reduce the influence of large private investors,” said Mr Andrew Collier, managing director of Orient Capital Research.

“This trend will continue the erosion of the most productive parts 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 seeking new business, Reuters reported last year.

Ant said on Saturday that its management would no longer serve in Alibaba Partnership, a body that can nominate the majority of the e-commerce giant’s board, affirming a change that started in the middle of 2022. REUTERS

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