The Chinese billionaire Jack Ma intends to divest control of Ant Group, according to people familiar with the facts who spoke exclusively to the Wall Street Journal. This transaction is part of the fintech giant’s effort to move away from its affiliate Alibaba after more than a year of heavy pressure from Chinese regulators.
Authorities have halted the IPO for over 34 billion Ant’s dollars in 2020 and are forcing the tech firm to reorganize as a financial holding company regulated by China’s central bank. As the review progresses, Ant takes the opportunity to reduce the company’s reliance on Mr. Ma, who founded Alibaba.
Jack Ma, one of China’s best-known entrepreneurs, has been the target of a Chinese government action that appears to be designed to curtail his influence and the power of his companies. But he’s been controlling Ant for about a decade. By managing to transform it over the years into a company that owns the Alipay payments network with over a billion users, an investment platform that hosts what was once the largest money market fund in the world with micro-lending activities.
Diminishing Ma’s control within the company could delay a potential revival of Ant’s IPO for a year or more. Chinese securities regulations call for a pause in public listing for companies that have undergone a recent change of control.
Ma does not currently hold an executive role at Ant or sit on its board of directors, but controls the 50,52% of the shares through an entity in which it holds the dominant position. She could relinquish control of him by transferring some of her voting power to other Ant officials, including the CEO Eric Jingafter which they would collectively control the company.
Ant told Chinese regulators of Ma’s intention to relinquish control as Ma prepares to convert into a financial holding company, according to insiders. Apparently the regulators have not asked for the change, but have expressed their consent on the issue.
The People’s Bank of China has not yet officially accepted Ant’s application to become a financial holding company. Any change in control is unlikely to materialize until the company’s restructuring is completed.
According to rumors from the Wall Street Journal, Ma has been considering relinquishing control of Ant for years, as he was concerned about the corporate governance risks of being too dependent on a single dominant figure at the top of the company.
The charismatic founder addressed these risks with Alibaba years ago, creating a partnership structure to ensure a sustainable succession. Recall that the Chinese billionaire left his post as CEO at Alibaba in 2013 and stepped down as president in 2019, thus retiring from the company. He currently holds less than the 5% of Alibaba’s shares.
The need to curb the former English teacher, currently among the richest Chinese, control over Ant has created new urgency as the tightened regulatory environment has spurred Ant and Alibaba to sever their ties. According to the Wall Street Journal on Tuesday, Alibaba revealed that seven senior Ant executives have stepped down from the Alibaba Partnership. In addition, the two companies also terminated long-standing business and data-sharing deals that had given Alibaba an edge.
According to sources, it appears that Ant is in no hurry to re-launch an IPO process for the time being, but is considering spin-off some departments and listing them separately.
For the time being, Ma controls Ant through the Hangzhou Yunbo Investment Consultancy entity which in turn controls the vehicles that hold more than half of Ant’s shares.
The shares are split like this, Ma holds the 34% of Hangzhou, the remaining 66% are equally split between CEO, Jing and former CEO Simon Hu, along with non-executive director Fang Jiang. It is worth mentioning that Ma owned the entire company but split the holdings in 2020 shortly before deciding to list the fintech.