Jack Ma relinquishes control of fintech giant Ant Group: WSJ – TechCrunch

China’s billionaire tech boss Jack Ma plans to relinquish control of Ant Group, the fintech powerhouse closely tied to Alibaba, the e-commerce giant he founded, The Wall Street Journal reported Thursday.

If realized, the move would mark another major turn in Ant’s restructuring and power shift since China called off its $35 billion IPO nearly two years ago.

Ant Group could not immediately be reached for comment.

Improvement

In November 2020, Chinese authorities halted Ant’s initial public offering, which at the time would have been the world’s largest public IPO, and then ordered Ant to undergo a “set-up” process that would subject the firm to the same financial regulations that oversee traditional banks.

Until that point, Ant, like many other Chinese internet firms, had grown at breakneck speed in a relatively lenient regulatory environment. The company spawned several multi-billion dollar fintech businesses, including Alipay, which dominates China’s mobile payments market in a duopoly shared with Tencent’s WeChat Pay; a money market fund that rose to be the world’s largest at one point; and a lucrative microloan business.

Ant, China’s financial authorities said, should “return to its roots in payments and bring more transparency to transactions; obtain the necessary licenses for its credit operations and protect users’ privacy; establish a financial holding company and ensure that it has sufficient capital; renew credit, insurance, wealth management and other financial businesses in accordance with the law; and increase compliance for the securities business.”

There are no signs that Ant will resume its IPO plans anytime soon. In June, the firm said it had “no plans to initiate an IPO” and was “focused on steadily moving forward with recovery efforts,” denying a Bloomberg report that Chinese regulators were considering reviving the IPO as they eased the crackdown on the technological industry.

China’s securities regulations restrict companies from listing domestically if they have undergone a major shareholder change in the past two to three years.

This means that Ant must continue to maintain the morale of employees who have been waiting to sell their shares. Last year, they had plans to offer interest-free loans to employees, Bloomberg reported.

It’s not just Ant that has to prevent a potential employee exodus, as China tightens rules on companies seeking overseas listings, which could affect internet giants like ByteDance.

The end of the Jack Ma era?

Ant started out as a payment processor for Alibaba, which Ma, then the e-commerce firm’s CEO, spun out in 2011. The incident caused major controversy that was said to happen when Alibaba shareholders Yahoo and SoftBank were in the dark. Ma justified the decision as necessary to secure a payment license to operate in China, which would not have been granted if the company had foreign shareholders.

The siblings then began a profit-sharing deal that saw Ant pay Alibaba a “royalty and technology service fee” equal to 37.5% of pre-tax profits each quarter, until 2018 when Alibaba bought 33% of Ant. The pair have been symbiotic, with Ant’s Alipay app deeply integrated into Alibaba’s suite of retail services and its financial services designated for business owners on Alibaba’s marketplaces.

Ma began preparing for his gradual withdrawal from Alibaba’s day-to-day operations nearly a decade ago and set up a partnership structure to ensure steady success across generations. He stepped down as Alibaba’s CEO in 2013 and stepped down as chairman in 2019. The founder owned less than 5% of the e-commerce giant in 2020.

But Ma has remained Ant’s largest shareholder. The firm’s 2020 IPO prospectus showed the founder held 50.52% of the shares through an entity he controlled.

Ant informed regulators of Ma’s intention to relinquish control as the company prepared to transition to a financial holding company, The Wall Street Journal reported. Regulators did not require the change, but have “given their blessing.” Ma may transfer his shares to some of Ant’s other executives such as CEO Eric Jing, the report said.