China’s charismatic entrepreneur, Jack Ma, has made headlines once again. In a surprising move, Ma is stepping down from his position of control in Ant Group, the renowned fintech company. The announcement, made by Ant Group on Saturday, revealed that the ownership structure will be revised, granting voting rights to 10 individuals, including the founder and management members.
This change means that Ma’s shareholding will decrease from over 50% to 6.2%. However, the economic interests of shareholders will remain unaffected, according to the company. This development marks a significant shift in the landscape of the financial technology industry.
What is Ant Group?
Ant Group, an affiliate of Alibaba and a fintech giant, boasts a staggering user base of over one billion on its digital payment platform. The company goes beyond payments, offering credit, investments, and insurance products to consumers and underserved small businesses. Its ultimate goal is to become a “super bank,” catering to the financial needs of the 450 million Chinese individuals without access to traditional banking services.
Ant Group is also eyeing China’s vast consumer credit market, which is projected to reach 50 trillion yuan by 2025. By providing loans through its platforms, Ant Group aims to solidify its position in the industry. Moreover, the company is expanding its presence internationally, targeting regions with large populations of migrants, such as Hong Kong, Singapore, Malaysia, as well as tourist hotspots like Thailand and Indonesia.
Despite its size and growth, Ant Group is subject to China’s strict regulatory policies towards technology companies. In 2021, the company faced significant challenges when its IPO, slated to be the world’s largest, was blocked, and major tech firms were slapped with hefty antitrust fines. These actions caused a plunge in stocks and forced several firms to put their listing plans on hold.
Why is Jack Ma giving up control of Ant Group?
The decision to relinquish control comes amidst an aggressive crackdown by Beijing against Big Tech companies. Ant Group’s shareholders have approved adjustments that will see Jack Ma give up most of his voting rights, reducing his total voting power to just over 6%. Currently, Ma owns 10% in Ant Group but exercises control through related entities. The revised voting arrangement aims to make the company’s shareholding structure more transparent and diversified, without compromising the economic interests of shareholders.
Ma’s departure from the company he co-founded is expected to have significant consequences for Ant Group’s future plans. Analysts predict that it may delay any potential IPO revival plans, as Hong Kong and Shanghai listing rules impose waiting periods for companies that have experienced major changes in control. These waiting periods are longer compared to other markets worldwide.
Prior to the adjustments, Ma controlled over 50% of the voting rights at Ant Group. His ownership included direct holdings of 10% and control through various entities that collectively owned 50.5%. Ma also exerted influence through agreements with company executives and employees. Additionally, he had gifted a portion of his Ant shares to friends and family over time, further complicating the ownership structure.
What is the impact of Ma’s departure on Ant Group?
Jack Ma has long been the face of Ant Group and Alibaba, but his influence has diminished recently due to increasing regulatory pressure. The revised voting rights arrangement ensures that no single shareholder holds complete control of the company, significantly reducing Ma’s voting share. Ant Group maintains that this adjustment will improve transparency and diversification while preserving the economic interests of shareholders.
Although the impact on Ant Group’s daily operations remains uncertain, this change could potentially revive the company’s plans to go public. Ant Group has been focusing on streamlining its operations to comply with regulations, bolstering its consumer loan affiliate capitalization, and fortifying its ecosystem with firewalls that enhance security.
Following Beijing’s intervention in Ant Group’s failed stock market flotation plan in 2020, Ma has gradually withdrawn from executive roles within the company and spent more time in Japan. His public appearances have become infrequent, usually limited to charity events or occasional travels abroad.
Ma’s departure from the company he built will reverberate throughout China. It signals the government’s success in making it challenging for tech entrepreneurs like Ma, who run large online businesses attracting foreign investors, to thrive in domestic markets. Moreover, this development may have ripple effects on the economy, prompting investors to divert funds away from companies subject to heightened government scrutiny.
What is the impact of Ma’s departure on Alibaba?
While Ma’s departure is undoubtedly a loss for Alibaba, the e-commerce giant is poised to thrive in an expanding sector. The company has been working on transitioning a new generation of executives, including Chief Financial Officer Maggie Wu, into its leadership ranks.
Ma’s decision to step back from daily operations aligns with his focus on philanthropy in education. He has long been an advocate for educational causes and has shown admiration for Bill Gates’ philanthropic work. Additionally, Ma is actively engaged in addressing environmental concerns, with his company allocating a portion of its profits to environmental causes. He has personally participated in initiatives such as campaigns against the shark fin trade.
Ant Group announced that Ma and nine other major shareholders have agreed to exercise their voting rights independently. As a result, Ma’s shareholding will reduce from 50% to 6.2%. This adjustment, reported by Reuters, may pave the way for Ant Group’s IPO plans to resume, which were initially derailed by Ma’s critical remarks about China’s regulatory policies. The company originally aimed for a $3 billion IPO, but government crackdowns on the growth of tech giants prevented its realization.
However, the changes within the company are likely to postpone its return to public markets. Chinese listing rules stipulate waiting periods of three years for A-share listings and two years for Shanghai’s Nasdaq-style STAR market after a change of control. This extended timeframe allows Ma and the new leadership team ample time to implement necessary adjustments before embarking on their public debut journey.