China’s Jack Ma is relinquishing control of Ant Group, it was announced by the company on Saturday. They say their ownership structure will change to allow 10 individuals, including founder and management members, voting rights independently.
This change will see Ma’s shareholding drop from over 50% to 6.2% without impacting the economic interests of shareholders, according to the company.
What is Ant Group?
Ant Group, an affiliate of Alibaba and fintech giant, boasts more than one billion users on its digital payment platform and provides credit, investments and insurance products to consumers as well as underserved small businesses. Their aim is to become a “super bank”, serving the financial needs of 450 million Chinese who do not have access to traditional banking services.
Ant is looking to tap China’s massive consumer credit market – which could reach 50 trillion yuan by 2025 – by offering loans through its platforms and anticipates this business to become its mainstay, surpassing payments. Furthermore, the company is expanding its presence outside China in places with large populations of migrants such as Hong Kong, Singapore and Malaysia as well as tourist spots like Thailand and Indonesia.
No matter its size or growth, China’s state plays a heavy role in its regulatory policies towards technology companies; as evidenced in 2021 when they blocked an IPO that would have been world’s biggest and issued huge antitrust fines against major tech firms causing stock tumble and listing plans of several firms to be put on hold.
PYMNTS reported that Ant’s efforts to restructure its ownership structure and obtain a financial holding company license has been put on pause by a government revamp of the country’s financial regulatory system. Officials will take several months determining who will lead the new regulator and how it will handle applications submitted by companies like Ant.
Ant is facing additional obstacles due to a slow-moving effort to form a national data bureau that will oversee credit scoring and other aspects of its business, delaying their hopes of applying for a credit-scoring license and keeping them from becoming fully on track toward becoming a super bank.
Why is Jack Ma giving up control of Ant Group?
Chinese fintech giant Ant announced on Saturday that its shareholders have approved of adjustments that will see founder Jack Ma relinquish most of his voting rights, giving up just over 6% total voting power in return. Ma currently owns 10% in Ant but exercises control through related entities; after implementation he would comprise only 6.1%. Ant said this adjustment would make its shareholding structure “more transparent and diversified”, without affecting economic interests for shareholders.
Beijing initiated an aggressive crackdown against Big Tech last year. Ant and Alibaba were specifically singled out as early targets of Beijing’s efforts to limit their influence.
Ma’s departure from the company he co-founded is expected to have profound repercussions for its future plans, according to analysts. Analysts suspect this may delay any potential IPO revival plans as Hong Kong and Shanghai listing rules preclude companies that have experienced any major change of control within three years from being listed – this waiting period is much longer than most markets around the world.
Before the changes were implemented, Ma controlled over 50% of voting rights at Ant. He owned 10% directly and controlled two entities that collectively own 50.5%, according to Ant’s IPO prospectus filed in 2020. Furthermore, he exerted influence through various acting-in-concert agreements with company executives and employees as well.
Ma has also gifted away many of his Ant shares to friends and family over time; one notable gift was a painting by renowned artist Liu Wen for HK$5.2 million (US$5.4 million), giving one-third share in Ant to his friend as part of an exchange agreement. It remains to be seen if this new voting arrangement will qualify as a change of control under A-share and Hong Kong listing regulations.
What is the impact of Ma’s departure on Ant Group?
Chinese billionaire Jack Ma has long been the face of his fintech firm. Since co-founding Alipay, its parent company now offers wealth management and consumer lending services as well. But Ma’s influence on this venture has diminished recently as its operations come under pressure from regulation as Beijing strives to slow the rise of Big Tech companies.
Ant Group announced in a statement that it will adjust its voting rights so no single shareholder holds complete control of the company, effectively decreasing Ma’s voting share from over 50% through various entities to around 6.2% according to CNN calculations. Ant Group claims this action is designed to make their company more transparent and diversified and won’t alter economic interests of shareholders.
Uncertain of what impact the new arrangement will have on Ant Group’s daily operations, however it could help the company revive its plans to list on public markets. Recently, Ant Group has focused on streamlining business operations to satisfy regulators, expanding consumer loan affiliate capitalization and building firewalls around its ecosystem that once allowed traffic from its ubiquitous payment platform to flow seamlessly into services such as insurance and wealth management.
Since Beijing foiled Ant’s stock market flotation plan in 2020 in response to his barbarous comments regarding government regulators, Ma has gradually transitioned out of executive roles within the company and moved back to Japan, according to media reports. He only makes rare public appearances at charity events or travel abroad occasionally.
Ma’s departure from the company he built will have far-reaching ramifications throughout China. His move signals that Chinese government has succeeded in making life difficult for tech entrepreneurs who run large online businesses that attract foreign investors to domestic markets. Furthermore, it may cause ripple effects throughout the economy as many investors may shift funds away from companies subject to increased government scrutiny.
What is the impact of Ma’s departure on Alibaba?
Ma has long been the face of Alibaba, but he is departing knowing the company will thrive in an expanding sector. Additionally, the e-commerce titan is working toward transitioning a new generation of executives – including current CFO Maggie Wu – into its executive ranks.
Reportedly, Ma wished to step back from daily operations and focus on his philanthropy in education. He has long supported educational causes and is particularly fond of Bill Gates’ work in this arena. Additionally, Ma is making an effort to address environmental concerns; his company dedicates a small yet significant percentage of profits toward environmental causes; furthermore, Ma is involved with efforts such as fighting shark fin trade campaigns himself.
Ant announced in a statement on Saturday that Ma and nine other major shareholders had reached an agreement to vote independently when exercising their voting rights at the company, meaning Ma’s own shareholding will reduce from 50% to 6.2% as reported by Reuters.
Although Ma’s departure is undoubtedly disappointing for his company, his decision to relinquish control will likely pave the way for its IPO plans to resume, which were shelved after Ma delivered a speech criticizing China’s finance-related regulatory policies in October of that year. Their original target was $US3 billion but due to government crackdowns that limited tech giant growth rates it never materialised.
Even if Ma is successful in his IPO plans, the changes at his firm will almost certainly put their return to public markets on hold for some time. Chinese listing rules dictate that companies must wait three years after a change of control before listing on China’s A-share market and two years for Shanghai’s Nasdaq-style STAR market; giving Ma and his new leadership enough time to implement necessary adjustments before embarking on what could still be an extended public debut journey.
