Chinese business tycoon Jack Ma plans to give up control over Ant Group by divesting his stake from an entity which dominantly controls the fintech giant, a report said on July 28.
Hangzhou Yunbo Investment Consultancy Co, an entity controlled by Ma, owns two units that cumulatively hold 50.52 percent of Ant's shares. Ma plans to reduce his stake in Hangzhou Yunbo in order to cede his control over Ant, The Wall Street Journal reported.
Ma holds a 34 percent stake in Hangzhou Yunbo, whereas, the remainder 66 percent is divided equally among Ant Chief Executive Eric Jing, former CEO Simon Hu and ex-non executive director Fang Jiang.
Ma held an entire stake in Hangzhou Yunbo till August 2020 but decided to part ways with two-thirds of the ownership ahead of Ant's initial public offering that was planned for 2020-end. While he reduced his stake to around one-third, the arrangement allowed him to hold veto power.
In order to relinquish his control over Ant, Ma is planning to dilute his voting powers in Hangzhou Yunbo by transferring some of his stake to other Ant executives, WSJ learnt from sources who are privy to the development.
While Jing, the Ant CEO, will remain a part of Hangzhou Yunbo, the other two stakeholders - Hu and Jiang - are likely to exit the entity, the report said.
Apart from Jing, the incumbent seniormost executives of Ant are Xiaofeng Shao, the company's executive vice president and Xingjun Ni, the chief technology officer.
The plan, if implemented, would delay the IPO revival plans for Ant as the norms of the China Banking and Insurance Regulatory Commission (CBIRC) mandate a timeout for public listing if the company has recently undergone a change in control.
The companies are barred from public listing on the domestic A-share market if the controlling shareholder has been changed in the past three years and from Shanghai’s Nasdaq-like STAR Market if the control was rejigged within the past two years.
A timeout of one year is mandatory for listing in the Hong Kong market. In the case of Ant, the IPO plans are bound to be hit as the entity had, in 2020, reportedly planned to list itself in the mainland, as well as the erstwhile British colony and Shanghai.
The $34 billion-IPO plan for 2020 was scuttled as the company came under scrutiny from the Chinese financial sector regulators, who wanted the fintech firm to reorient itself as a financial holding company regulated by the People's Bank of China (PBOC).
The Chinese central bank is yet to officially accept Ant's application to be recognised as a financial holding firm. The company, as per the WSJ report, has informed the regulators about Ma's plan to cede control. The regulators had not called for the rejig but gave their "blessing" to the potential move, the newspaper learnt from sources.
Moneycontrol could not independently verify the developments.
Ant, notably, was founded by Ma in 2014 after carving Alipay out of Alibaba Group Holdings. The company, then known as Ant Financial Services, managed Alipay and other financial businesses which included consumer lending. Its name was changed to Ant Group in 2020.
In April 2021, Reuters had reported that Ant was exploring ways for Ma to exit the group. Between January and March last year, PBOC and CBIRC officials held separate meetings with Ant and Ma, which included discussions over the latter's possible exit, the news agency had learnt from sources.
The development was predated by a WSJ report in December 2020, which claimed that Ma in November that year offered to hand over parts of Ant to the Chinese government. The offer was made during his meetings with the regulators, the report had claimed.
The latest WSJ report, which points towards how Ma is planning to cede control of Ant through changes in the complicated structure of investment vehicles, comes on a day when the 57-year-old's flagship firm Alibaba's shares closed at 99.15 HKD, which was 1.83 percent lower as compared to the previous day's close.In the US market, the premarket value of Alibaba's share was $101.74, MarketWatch reported, which was nearly one percent lower as compared to the closing price of $102.78 on July 27.