© Reuters. FILE PHOTO: A sign of Ant Group is seen during the World Internet Conference in Wuzhen
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By Julie Zhu
HONG KONG (Reuters) – Ant Group explores options for founder Jack Ma to sell his stake in financial technology giant and relinquish control, as meetings with Chinese regulators have indicated the company could take the step to draw a line under investigation in Beijing, according to a source familiar with the regulators’ thinking, and two people with close ties to the company.
Reuters reports for the first time details of the latest round of meetings and the discussions about the future of Mom’s control over Ant, which is being exercised by an intricate structure of investment vehicles. The Wall Street Journal reported earlier that in a meeting with regulators in November, Ma offered to hand over parts of Ant to the Chinese government. https://on.wsj.com/2QvkHbc
Officials from the central bank, People’s Bank of China (PBOC), and the financial regulator China Banking and Insurance Regulatory Commission (CBIRC) spoke to Ma and Ant separately between January and March, discussing the possibility of the magnate’s exit from the company was discussed. , according to reports from the source who is familiar with the regulators’ thinking and one of the sources with close ties to the company.
Ant denied that a sale of Mom’s interest was ever considered. ‘The sale of Mr. Mom’s stake in Ant Group has never been the subject of discussions with anyone, ‘an Ant spokesman said in a statement.
Reuters could not determine whether Ant and Ma would continue with a put option, and if so, which one. The company hoped that Ma’s stake, worth billions of dollars, could be sold to existing investors in Ant or its e-commerce subsidiary. Alibaba (NYSE 🙂 Group Holding Ltd without involving any external entity, said one of the sources with company ties.
But the second source, also with company connections, said that during talks with regulators, Ma said that he should not sell his interest to any entity or individual near him, and that he should rather retire completely. Another option would be to transfer his stake to a Chinese investor affiliated with the state, the source said.
Both sources with knowledge of the thinking of the company said that any move should give approval.
The reports provided by all three sources are consistent with respect to the timeline for developing discussions over the past few months. On the company’s side, one source said that Mom had met regulators more than once before the Chinese New Year, which was in early February. And the second source said that Ant started working on the options for Mom’s possible retirement about a few months ago. The source familiar with the regulators’ thinking said Ant told officials at a meeting sometime before mid-March that he was working on options.
The source, who is familiar with the regulators’ thinking, has direct knowledge of conversations between Ant and officials, while one of the sources with industry ties was informed about Ma’s interaction with regulators and Ant’s plans. The other one has direct knowledge of Ant’s discussions about options. They asked for anonymity because of the sensitivity of the situation.
The Ant spokesperson does not comment from Ma. Alibaba has questions to Ant. Jack Ma’s office did not respond to Reuters’ request for comment via Ant. The Council of State Information Bureau, PBOC and CBIRC, also did not respond to requests for comment.
The discussions on high stakes come amid an overhaul of Ant and a wider regulatory constraint on the Chinese technology sector that got underway after Mom’s public criticism of regulators in a speech in October last year.
Mom’s resignation could help give Ant the way to revive plans for publicity, which came to a halt after the magnate’s speech, both sources said. Ant, which was on the verge of raising an estimated $ 37 billion in what would be the world’s largest initial public offering, discontinued the plan the day after Mom’s November 2 meeting with regulators.
‘TOO BIG FOR THEIR BRITCHES’
Since then, Beijing has unleashed a series of investigations and new regulations that have not only reigned in Ma’s empire, but also washed out in the country’s technology sector, including other high-profile billionaire entrepreneurs.
The consequences were for Ma (56), who also founded Alibaba and once commanded a cult-like reverence in China. The magnate withdrew from the public eye for about three months and still maintained a low profile after a brief appearance in January.
China’s antitrust regulator fined Alibaba a record $ 2.75 billion on April 10 after an antimonopoly investigation found he had abused his dominant market position for several years. A few days later, Ant was asked by the central bank to become a financial holding company and brought it under the banking rules he had so far managed to avoid and grow it rapidly.
“China still likes to promote its technology ventures as world leaders, as long as they do not grow too big for their problems,” said Andrew Collier, managing director of Orient Capital Research.
GOVERNMENT INTEREST
Although Ma resigned from his positions earlier, he retains effective control over Ant and has a significant influence on Alibaba.
While holding only a 10% stake in Ant, Ma exercises control over the company through related entities, according to Ant’s IPO prospectus.
Hangzhou Yunbo, an investment vehicle for Ma, controls two other entities that own a combined 50.5% stake in Ant, according to the prospectus. Yunbo can decide on all matters related to Ant and exercise the joint voting power of the three entities, it appears from the prospectus.
Mom has a 34% stake in Yunbo, according to the prospectus.
One of the sources with industry ties said there is a high chance that Ma will sell his shareholding in Yunbo to leave Ant, eventually paving the way for the fintech major to get closer to his build-up and leave his listing revive.
Reuters could not reach Yunbo for comment. Ant did not comment on behalf of Yunbo.