The founder of Ant Group, Jack Ma, gives up control in terms of renewal

Alibaba founder Jack Ma attends the 5th Zhejiang entrepreneurs world convention at Hangzhou International Expo Center on November 13, 2019 in Hangzhou, China’s Zhejiang province.

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Ant Group founder Jack Ma to relinquish control of the Chinese fintech giant in a review that seeks to draw a line under a regulatory crackdown that was triggered soon after its giant stock market debut was scuppered two years does.

Ant’s $37 billion IPO, which would have been the world’s largest, was canceled at the last minute in November 2020, leading to a forced restructuring of the fin-tech company and speculation that the Chinese billionaire might have give up control.

While some analysts said a relinquishment of control could pave the way for the company to revive its IPO, the changes announced by the group on Saturday, however, could mean further delay due to listing regulations.

China’s domestic A-share market requires companies to wait three years after a change of control before going public. The wait is two years on the Nasdaq-style STAR market in Shanghai and one year in Hong Kong.

A former English teacher, Ma previously owned more than 50% of the voting rights in Ant, but the changes will see his stake drop to 6.2%, according to Reuters calculations.

But he only owns a 10% stake in Ant, a subsidiary of e-commerce giant Alibaba Group Holding Ltd. <9988.HK>but exercised control over the company through related entities, according to Ant’s IPO prospectus filed with exchanges in 2020.

Hangzhou Yunbo, an investment vehicle for Ma, had control over two other entities that hold a combined 50.5% stake in Ant, the prospectus shows.

The divestment of control of Ma comes as Ant nears the completion of its two-year regulatory restructuring, with Chinese authorities poised to impose a fine of more than $1 billion on the firm, Reuters reported in November.

The planned fine is part of Beijing’s unprecedented and sweeping crackdown on the country’s tech titans over the past two years, which has cut hundreds of billions of dollars off their value and slashed revenues and profits.

But in recent months, Chinese authorities have softened their tone on the tech crackdown amid efforts to shore up a $17 trillion economy that has been badly damaged by the COVID-19 pandemic.

“With China’s economy in a very feverish state, the government is trying to signal its commitment to growth, and technology, private sectors are key to that, as we know,” said Duncan Clark, chairman of the investment advisory firm BDA China.

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

Regulatory control

Ant operates China’s ubiquitous mobile payment app Alipay, the world’s largest, which has more than 1 billion users.

Ant, whose businesses also include consumer loans and distribution of insurance products, said Ma and nine of its other major shareholders have agreed to no longer act in concert when exercising voting rights and will only vote independently.

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

Ant also said it will add a fifth independent director to its board so that independent directors make up the majority of the company’s board. You currently have eight board members.

“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 its statement.

Reuters reported in April 2021 that Ant was exploring options for Ma, one of China’s most successful and influential businessmen, to divest his stake in Ant and relinquish control.

The Wall Street Journal reported in July last year, citing unnamed sources, that Ma could relinquish 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 just days after Ma publicly criticized regulators in a speech in October 2020. Since then, his vast empire has come under regulatory scrutiny and undergone restructuring .

Once outspoken, Ma has largely remained out of the public eye after the regulatory crackdown that reined in the country’s tech giants and eliminated a laissez-faire approach that drove soaring growth.

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

“This trend will continue the erosion of the most productive parts of China’s economy.”

While Chinese regulators frown on monopolies and unfair competition, Ant and Alibaba have untangled their operations from each other and independently sought new business, Reuters reported last year.

Ant said on Saturday that its management will no longer serve in the Alibaba Partnership, a body that can appoint a majority of the e-commerce giant’s board, saying a shift that began in the middle of last year.

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