There is one boss, and that boss is the state: Jack Ma relinquishes control over Ant Group

Ant Group founder Jack Ma will relinquish control over the Chinese fintech giant in a revision following regulatory pressure that was initiated shortly after his massive stock market debut was halted two years ago, Reuters reported.

Ant’s $37 billion IPO, which would have been the largest in the world, was canceled at the last minute in November 2020, leading to the company’s forced restructuring and speculation that the Chinese billionaire would have to cede control. Although some analysts said that relinquishing control could pave the way for the company to revive its IPO, the changes announced by the group on Saturday are likely to result in further delays due to listing regulations.

The Chinese domestic A-share market requires companies to wait three years after a change of control before being listed on the stock exchange. There is a two-year wait on the Shanghai STAR market, styled after Nasdaq, and one year in Hong Kong.

Jack Ma previously owned more than 50 percent of the voting rights in Ant, but his stake will fall to 6.2 percent, according to Reuters calculations. Ma owns only ten percent of the shares in Ant, a subsidiary of e-commerce giant Alibaba Group Holding Ltd, but he exercised control over the company through related entities, according to Ant’s IPO prospectus submitted to the exchanges in 2020.

Hangzhou Yunbo, an investment company owned by Ma, had control over two other entities that together own 50.5 percent of the shares in Ant. Ma’s relinquishment of control comes at a time when Ant is nearing the completion of its two-year regulatory-driven restructuring, and Chinese authorities are preparing to impose a fine of over a billion dollars on the company, Reuters reported in November.

The expected fine is part of a comprehensive crackdown by Beijing on tech titans over the past two years, which has wiped out hundreds of billions of dollars of their value and reduced revenues and profits. However, Chinese authorities have softened their stance in recent months to bolster the $17 trillion economy that has been severely damaged by the Covid-19 pandemic.

– With the Chinese economy in very poor shape, the government is trying to signal its commitment to growth, and the tech and private sectors are key to that, as we know – said Duncan Clark, chairman of investment advisory firm BDA China.

– Investors in Ant can now at least have some exit schedule after a long period of uncertainty – said Clark, who is also the author of a book about Alibaba and its owner.

One boss – the state

Ant operates the ubiquitous (and largest in the world) Chinese mobile payment app Alipay, which has over a billion users. From the company, whose business also includes consumer loans and insurance product distribution, they said that Ma and his nine other major shareholders have agreed to no longer act in concert when exercising voting rights and will vote independently.

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

Ant also stated that it will add a fifth independent director to its board so that independent directors will constitute the majority on the company’s board. Currently, there are eight board members.

– As a result, there will no longer be a situation where a direct or indirect shareholder has exclusive or joint control over Ant Group – the statement said.

Reuters reported in April 2021 that Ant was exploring options for Ma, one of the most successful and influential Chinese entrepreneurs, 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 transferring part of his voting power to Ant officials, including CEO Eric Jing.

Ant’s listing on the Hong Kong and Shanghai markets was halted a few days after Ma publicly criticized regulators in a speech in October 2020. Since then, his vast empire has been under regulatory scrutiny and is undergoing restructuring.

– Jack Ma’s departure from Ant Financial, the company he founded, demonstrates the determination of Chinese leadership to reduce the influence of large private investors – said Andrew Collier, director of Orient Capital Research.

– This trend will continue to erode the most productive parts of the Chinese economy – he concluded.