Alibaba Group is considering whether to sell shares of Ant Group back to the fintech company, which has proposed to start a $6 billion share repurchase program after wrapping up an almost three-year regulatory crackdown that has slashed its once $300 billion-plus valuation by a steep 75%.
The e-commerce behemoth cofounded by billionaire Jack Ma said it has received notice from Ant Group of a shareholder meeting to approve the proposal, according to a filing to the Hong Kong Stock Exchange on Sunday. Alibaba, which holds a 33% stake in Ant, said any repurchased shares will be transferred into the fintech company’s employee incentive plan.
The individual limited partners of investment firms Hangzhou Junhan and Hangzhou Junao, which include Ma himself and are also major Ant shareholders, have voluntarily decided not to participate in the repurchase, according to a Saturday statement from an Ant spokesperson. They made the decision “out of the commitment and confidence in the long-term development of Ant Group,” according to the statement.
Even with the end of the regulatory crackdown, Ant faces an uphill battle to regain its former glory. It was fined almost $1 billion for violating China’s various laws and regulations related to corporate governance, consumer protection and clearing, the country’s central bank, the People’s Bank of China, said in a late Friday statement. The penalty was announced almost three years after Ant’s massive $35 billion IPO—which would have been the world’s largest listing and valued the company north of $300 billion—had been abruptly called off in late 2020 in a shocking decision that came in the wake of Ma’s now infamous criticism of the country’s banking sector.
Since then, Ant has been forced to rein in its once sprawling operations that included consumer loans, digital payment, insurance and mutual fund. The company is also required to become a financial holding company, which will see it being regulated more like a bank instead of a fast-growing fintech firm.
Ma, in the meantime, is expected to gradually cede control of the company he cofounded more than 20 years ago. His net worth, which comprises of ownerships in both Alibaba and Ant, has almost halved to $24.3 billion as Beijing also carried out over the past few years a sweeping crackdown on the entire internet sector to rein the market influence of the country’s biggest titans.
Now, the $6 billion share repurchase program provides a “liquidity option” for Ant’s investors, according to the Ant spokesperson. The company has previously raised funding from both domestic and international investors that include Canada Pension Plan Investment Board, Temasek and private equity giants Carlyle Group and Warburg Pincus, but an IPO revival is at least years away in part because, under Chinese rules, companies recently experiencing an ownership change are required to undergo a time-out period.
And with intensified regulatory scrutiny, it is “very hard” for Ant to achieve its former valuation, says Shen Meng, managing director of Beijing-based boutique investment bank Chanson & Co. “After a long revamp, Ant’s businesses have become limited to some extent,” he says. “Regulatory strength will remain at a high level as it is now treated more like a financial firm