Chinese billionaire Jack Ma will no longer control Ant Group after the fintech giant’s shareholders agreed to reshape its shareholding structure, according to a statement released by the company on Saturday.
After the adjustment, Ma’s voting rights will fall to 6.2%, according to the statement and CNN calculations.
Before the restructure, Ma held 50.52% of voting rights at Ant via Hangzhou Yunbo and two other entities, according to its IPO prospectus filed with stock exchanges in 2020.
Ant added in the statement that the voting rights adjustment, a move to make the company’s shareholder structure “more transparent and diversified,” will not result in any change to the economic interests of any shareholders.
Ant said its 10 major shareholders, including Ma, had agreed to no longer act in concert when exercising their voting rights, and would only vote independently, and thus no shareholder would have “sole or joint control over Ant Group.”
The voting rights overhaul came after Chinese regulators pulled the plug on Ant’s $37 billion IPO in November 2020, and ordered the company to restructure its business.
As part of the company’s restructuring, Ant’s consumer finance unit applied for an expansion of its registered capital from $1.2 billion to $2.7 billion. The China Banking and Insurance Regulatory Commission recently approved the application, according to a government notice issued late last week.
After the fund-raising drive, Ant will control half of its key consumer finance unit, while an entity controlled by the Hangzhou city government will own a 10% stake. Hangzhou is where Alibaba and Ant have been headquartered since their inceptions.
Ant Group is a fintech affiliate of Alibaba, both of which were founded by Ma.
Hong Kong stocks had their worst day since the 2008 global financial crisis, just a day after Chinese leader Xi Jinping secured his iron grip on power at a major political gathering.
Foreign investors spooked by the outcome of the Communist Party’s leadership reshuffle dumped Chinese equities and the yuan despite the release of stronger-than-expected GDP data. They’re worried that Xi’s tightening grip on power will lead to the continuation of Beijing’s existing policies and further dent the economy.
Hong Kong’s benchmark Hang Seng
(HSI) Index plunged 6.4% on Monday, marking its biggest daily drop since November 2008. The index closed at its lowest level since April 2009.
The Chinese yuan weakened sharply, hitting a fresh 14-year low against the US dollar on the onshore market. On the offshore market, where it can trade more freely, the currency tumbled 0.8%, hovering near its weakest level on record, even as the Chinese economy grew 3.9% in the third quarter from a year ago, according to the National Bureau of Statistics. Economists polled by Reuters had expected growth of 3.4%.
The sharp sell-off came one day after the ruling Communist Party unveiled its new leadership for the next five years. In addition to securing an unprecedented third term as party chief, Xi packed his new leadership team with staunch loyalists.
A number of senior officials who have backed market reforms and opening up the economy were missing from the new top team, stirring concerns about the future direction of the country and its relations with the United States. Those pushed aside included Premier Li Keqiang, Vice Premier Liu He, and central bank governor Yi Gang.
“It appears that the leadership reshuffle spooked foreign investors to offload their Chinese investment, sparking heavy sell-offs in Hong Kong-listed Chinese equities,” said Ken Cheung, chief Asian forex strategist at Mizuho bank.
The GDP data marked a pick-up from the 0.4% increase in the second quarter, when China’s economy was battered by widespread Covid lockdowns. Shanghai, the nation’s financial center and a key global trade hub, was shut down for two months in April and May. But the growth rate was still below the annual official target that the government set earlier this year.
“The outlook remains gloomy,” said Julian Evans-Pritchard, senior China economist for Capital Economics, in a research report on Monday.
“There is no prospect of China lifting its zero-Covid policy in the near future, and we don’t expect any meaningful relaxation before 2024,” he added.
Coupled with a further weakening in the global economy and a persistent slump in China’s real estate, all the headwinds will continue to pressure the Chinese economy, he said.
Evans-Pritchard expected China’s official GDP to grow by only 2.5% this year and by 3.5% in 2023.
Monday’s GDP data were initially scheduled for release on October 18 during the Chinese Communist Party’s congress, but were postponed without explanation.
The possibility that policies such as zero-Covid, which has resulted in sweeping lockdowns to contain the virus, and “Common Prosperity” — Xi’s bid to redistribute wealth — could be escalated was causing concern, Cheung said.
“With the Politburo Standing Committee composed of President Xi’s close allies, market participants read the implications as President Xi’s power consolidation and the policy continuation,” he added.
Mitul Kotecha, head of emerging markets strategy at TD Securities, also pointed out that the disappearance of pro-reform officials from the new leadership bodes ill for the future of China’s private sector.
“The departure of perceived pro-stimulus officials and reformers from the Politburo Standing Committee and replacement with allies of Xi, suggests that ‘Common Prosperity’ will be the overriding push of officials,” Kotecha said.
Under the banner of the “Common Prosperity” campaign, Beijing launched a sweeping crackdown on the country’s private enterprise, which shook almost every industry to its core.
“The [market] reaction in our view is consistent with the reduced prospects of significant stimulus or changes to zero-Covid policy. Overall, prospects of a re-acceleration of growth are limited,” Kotecha said.
On the tightly controlled domestic market in China, the benchmark Shanghai Composite Index dropped 2%. The tech-heavy Shenzhen Component Index lost 2.1%.
The Hang Seng Tech Index, which tracks the 30 largest technology firms listed in Hong Kong, plunged 9.7%.
Shares of Alibaba
(BABA) and Tencent
(TCEHY) — the crown jewels of China’s technology sector — both plummeted more than 11%, wiping a combined $54 billion off their stock market value.
The sell-off spilled over into the United States as well. Shares of Alibaba and several other leading Chinese stocks trading in New York, such as EV companies Nio
HONG KONG—Billionaire Jack Ma plans to relinquish control of Ant Group Co., people familiar with the matter said, part of the fintech giant’s effort to move away from affiliate Alibaba Group Holding Ltd. after more than a year of extraordinary pressure from Chinese regulators.
The authorities halted Ant’s $34 billion-plus IPO in 2020 at the 11th hour and are forcing the technology firm to reorganize as a financial holding company regulated by China’s central bank. As the overhaul progresses, Ant is taking the opportunity to reduce the company’s reliance on Mr. Ma, who founded Alibaba.
Mr. Ma, a 57-year-old former English teacher and one of China’s most prominent entrepreneurs, has been the target of government action that appears designed to reduce his influence and the power of his companies. He has controlled Ant since he carved its precursor assets out of Alibaba more than a decade ago. Over time he built it into a company that owns the Alipay payments network with more than one billion users, an investing platform that houses what was once the world’s largest money-market fund, and a large microlending business. Ant was expected to be valued at more than $300 billion had it gone public.
Diminishing his ownership could put back a potential revival of Ant’s IPO for a year or more. Chinese securities regulations require a timeout on public listings for companies that have gone through a recent change in control.
Mr. Ma doesn’t hold an executive role at Ant or sit on its board, but is a larger-than-life figure at the company and currently controls 50.52% of its shares via an entity in which he holds the dominant position. He could relinquish his control by transferring some of his voting power to other Ant officials including Chief Executive
Eric Jing,
after which they would collectively control the company, some of the people said.
Ant told regulators of Mr. Ma’s intention to cede control as the company prepared to convert into a financial holding company, the people familiar with the matter said. Regulators didn’t demand the change but have given their blessing, the people said. Ant is required to map out its ownership structure when it applies to become a financial holding company.
The People’s Bank of China has yet to officially accept Ant’s application to become a financial holding company. Any change of control isn’t likely to materialize until Ant’s restructuring is complete.
Ant owns the Alipay payments network that has more than one billion users.
Photo:
Qilai Shen/Bloomberg News
Mr. Ma has personally contemplated ceding control of Ant for years, some of the people said. He has been concerned about the corporate-governance risks arising from being too reliant on a single dominant figure atop the company, those people said.
The charismatic founder addressed those risks at Alibaba years ago by setting up a partnership structure to ensure a sustainable succession as its first generation of leaders moved on. He gave up the CEO job at Alibaba in 2013 and stepped down as chairman in 2019 when he retired from the company. He currently holds less than 5% of Alibaba’s shares.
American depositary shares of Alibaba traded in the U.S. fell 2.2% on Thursday. They have lost nearly half their value over the past 12 months.
The need to end Mr. Ma’s control at Ant gained new urgency as the souring regulatory environment spurred Ant and Alibaba to cut their ties. On Tuesday, Alibaba revealed seven top Ant executives had stepped down from the Alibaba partnership, the top echelon of management at Alibaba and its subsidiaries. The two companies also terminated long-running commercial and data-sharing agreements that had given Alibaba an edge.
Mr. Ma previously held back from giving up control of Ant because he didn’t want to delay the company’s plans for an initial public offering, some of the people familiar with the matter said. The scuttling of those plans—after Mr. Ma laid into financial regulators in a speech—removed that obstacle and created a fresh opportunity for Mr. Ma to resolve the matter, those people said.
A change in control could mean that Ant will have to wait a while longer before it tries going public again. Chinese securities regulations state that companies can’t list domestically on the country’s A-share market if they have had a change of controlling shareholder in the past three years—or in the past two years if listing on Shanghai’s Nasdaq-like STAR Market.
In less than six months, China’s tech giant Ant went from planning a blockbuster IPO to restructuring in response to pressure from the central bank. As the U.S. also takes aim at big tech, here’s how China is moving faster. Photo illustration: Sharon Shi
Hong Kong also imposes a waiting period but only for one year. Ant’s scuttled IPO plan included simultaneous listings in the former British colony as well as Shanghai.
Ant is in no rush to attempt an IPO again and intends to keep its options open, some of the people said. The company could consider other moves including spinning off units that could in turn be listed themselves, those people said.
Mr. Ma controls Ant through an entity called Hangzhou Yunbo Investment Consultancy Co., which in turn controls two vehicles that together own a little more than half of Ant’s shares.
Mr. Ma has a 34% stake in Hangzhou Yunbo. The other 66% is split evenly among Ant’s CEO, Mr. Jing, former CEO
Simon Hu
and veteran Alibaba executive and former Ant nonexecutive director Fang Jiang.
The billionaire originally owned all of the entity. He transferred two-thirds of the shares to the three executives in August 2020 before Ant filed its IPO prospectus. At the same time, Mr. Ma was given veto power over Hangzhou Yunbo’s decisions, according to the prospectus. The arrangement was designed to give the other executives more say in Ant’s affairs without triggering an effective change in control that could delay the IPO, a person familiar with the matter said.
Jack Ma doesn’t hold an executive role at Ant or sit on its board but controls 50.52% of its shares via an entity in which he holds the dominant position.
Photo:
bobby yip/Reuters
Mr. Ma could cede control of Ant by diluting his voting power in Hangzhou Yunbo via giving up his veto and transferring some of his stake to other executives, the person said.
Mr. Hu, who resigned as Ant’s CEO last year and recently retired, and Ms. Jiang, who left Ant’s board last year, will likely exit Hangzhou Yunbo and be replaced by other Ant executives. In addition to Mr. Jing, Ant’s most senior executives are now Executive Vice President Xiaofeng Shao and Chief Technology Officer Xingjun Ni. Mr. Shao is also the general secretary of Ant’s Communist Party committee, according to people familiar with the matter. Mr. Ni was instrumental in founding Alipay in 2004.
Mr. Ma’s control over Ant goes back more than a decade to the period when he was CEO of Alibaba. In 2011, it emerged that he had carved the payments business Alipay out of Alibaba without the knowledge of key shareholders including Yahoo Inc. and
SoftBank Group Corp.
9984 0.37%
Alibaba argued the transfer was needed for Alipay to secure a Chinese license that might not have been granted if the company had foreign shareholders. Following the move, China’s central bank in May 2011 gave Alipay a license to operate as a payment-services company. Yahoo and SoftBank were later compensated by an agreement that allowed them to share economic interests in Ant through their ownership in Alibaba.
In 2014, Ant Financial Services Group was created to hold Alipay and other financial businesses including consumer lending. The company in 2020 changed its name to Ant Group.
Write to Jing Yang at Jing.Yang@wsj.com and Raffaele Huang at raffaele.huang@wsj.com
boosted its share buyback program to $25 billion from $15 billion, in a bid to reassure investors about the company’s prospects after a year in which its stock has fallen by more than half.
The potential buybacks are substantial compared with the Chinese e-commerce giant’s market value: As of Monday, it had a market capitalization of about $270 billion, according to FactSet.
The modified repurchase program will be effective for two years through March 2024,
Alibaba
BABA -4.35%
said on Tuesday morning Hong Kong time. It said the 67% increase in the firepower allocated for buybacks was “a sign of confidence about the company’s continued growth in the future.”
Chinese technology stocks in Hong Kong, China and in the U.S.—where they are listed as American depositary receipts—have been highly volatile recently amid worries that U.S. regulators may move to delist Chinese companies as soon as 2024 and signs that Beijing’s long-running regulatory crackdown will continue.
Alibaba’s New York Stock Exchange-listed ADRs are down nearly 13% so far this year—and have fallen about 57% over the past 12 months—according to FactSet. Its stock also trades in Hong Kong, where shares jumped 11% Tuesday.
Alibaba said it repurchased about $9.2 billion worth of ADRs as of March 18 under its previous program. That sum will count toward the new $25 billion total.
Citigroup analysts said the enlarged buyback plan was “likely the largest share repurchase program ever in China’s internet sector,” and suggested Alibaba’s management viewed its stock as undervalued and attractive.
Separately, the company said Weijian Shan, executive chairman of investment group PAG, would join the board as an independent director starting March 31.
Ericsson
Chief Executive
Börje Ekholm,
who has served on the board since 2015, will step down the same day, Alibaba said.
Many companies use buybacks to return cash to shareholders. The plans can help support stock prices by signaling confidence in the company’s outlook and its financial health, while boosting earnings per share. In recent years, they have also caused controversy, with critics arguing it would be better to reinvest the money back into the business, in areas like equipment, research and higher wages.
Companies on the S&P 500 have poured more than $5.3 trillion into repurchasing their own shares since 2010. WSJ explains how stock buybacks work, and why there’s debate over whether or not they’re good for the economy.
S&P 500 firms outlined $238 billion of buyback plans in the first two months of 2022, according to Goldman Sachs, and the bank has forecast the full-year total could rise 12% to $1 trillion.
Some of the biggest U.S. technology companies have embraced even bigger repurchase programs than Alibaba. Last year, for example, Google’s parent company
Alphabet Inc.
and
Microsoft Corp.
earmarked up to $50 billion and $60 billion, respectively, for buybacks.
Write to P.R. Venkat at venkat.pr@wsj.com and Quentin Webb at quentin.webb@wsj.com
HONG KONG—A massive selloff in Chinese technology stocks accelerated on Tuesday, as investors unnerved by China’s widening crackdown on Internet companies and other industries sold down their holdings of many popular stocks.
The Hang Seng Tech Index in Hong Kong, which includes stocks such as Tencent Holdings Ltd. and Alibaba Group Holding Ltd. , crashed 8%, registering its third day of declines. The city’s flagship Hang Seng Index dropped 4.2%.
In mainland China, the CSI 300 benchmark retreated 3.5%. The Chinese yuan weakened against the dollar, with the offshore currency trading beyond 6.50 yuan per dollar, versus a previous close of 6.4834, according to FactSet.
Among big individual stocks, online gaming and social-media giant Tencent fell 9%. The selloff pushed Tencent’s market value down to about $544 billion, according to FactSet—meaning it has lost about $390 billion of market capitalization since peaking in mid-February. Hong Kong-listed shares in Alibaba, China’s biggest e-commerce company, also lost ground, falling 6.4%.
China is months into a campaign to rein in big tech that has spanned issues such as data security, monopolistic behavior and financial stability. The regulatory clampdown, which has entangled companies such as Alibaba, its sister company Ant Group Co., and the ride-hailing giant Didi Global Inc., continues to unfold.
to dispose of its media assets, as officials grow more concerned about the technology giant’s sway over public opinion in the country, according to people familiar with the matter.
Discussions over the matter have been held since early this year, after Chinese regulators reviewed a list of media assets owned by the Hangzhou-based company, whose mainstay business is online retail. Officials were appalled at how expansive Alibaba’s media interests have become and asked the company to come up with a plan to substantially curtail its media holdings, the people said. The government didn’t specify which assets would need to be unloaded.
Alibaba, founded by billionaire
Jack Ma,
has throughout the years assembled a formidable portfolio of media assets that span print, broadcast, digital, social media and advertising. Notable holdings include stakes in the
Twitter
-like Weibo platform and several popular Chinese digital and print news outlets, as well as the South China Morning Post, a leading English-language newspaper in Hong Kong. Several of these holdings are in U.S.-listed companies.
Such influence is seen as posing serious challenges to the Chinese Communist Party and its own powerful propaganda apparatus, the people said.
The party’s propaganda department didn’t reply to a faxed request seeking comment.
Alibaba declined to comment on discussions with regulators pertaining to possible media asset disposals. In a statement, the company said it is a passive financial investor in media assets.
“The purpose of our investments in these companies is to provide technology support for their business upgrade and drive commercial synergies with our core commerce businesses. We do not intervene or get involved in the companies’ day-to-day operations or editorial decisions,” the statement said.
The asset-disposal discussions are the latest development in a series of run-ins between Beijing and Mr. Ma, who was once China’s most-celebrated entrepreneur. Late last year, Chinese leader
Xi Jinping
personally scuttled plans by Ant Group Co.—Alibaba’s financial-technology affiliate—to launch what would have been the world’s largest initial public offering, amid growing unease in Beijing over Ant’s complex ownership structure and worries that Ant was adding risk to the financial system. Mr. Xi was also angry at Mr. Ma for criticizing his efforts to strengthen financial oversight.
Antitrust regulators are also preparing to levy a record fine in excess of $975 million over what they call anticompetitive practices on Alibaba’s e-commerce platforms, The Wall Street Journal previously reported citing people with knowledge of the matter. In addition, Alibaba would be required to end a practice under which, regulators believe, the tech giant forbade merchants to sell goods on both Alibaba and rival platforms.
Beyond media and online retail, Alibaba also has a sizable entertainment division, consisting mainly of Hong Kong-listed
Alibaba Pictures Group Ltd.
and Youku Tudou Inc., one of China’s largest video streaming platforms. Officials also reviewed Alibaba’s entertainment portfolio, although outright divestitures in that part of Alibaba’s business may not be necessary, people familiar with discussions related to Alibaba’s entertainment business said.
It isn’t clear whether Alibaba will need to sell all of its media assets. Any plan that Alibaba comes up with will need approval from China’s senior leadership, people familiar with the matter said.
Concerns have been growing in recent years in China’s officialdom over Alibaba’s media clout and how the company may have leveraged its investments in news and social media to influence government policies deemed unfavorable to its businesses.
Those concerns grew following an incident in May last year when scores of Weibo posts about a senior Alibaba executive’s alleged involvement in an extramarital affair were deleted.
After Jack Ma criticized Chinese regulators, Beijing scuttled the initial public offering of his fintech giant Ant and he largely disappeared from public view. WSJ looks at recent videos of the billionaire to show how he got himself into trouble.
An ensuing investigation by the Cyberspace Administration of China, the country’s internet watchdog, found that Alibaba was responsible for the interference with Weibo posts and said the company had used “capital to manipulate public opinion” in a report to the leadership, the Journal has reported, citing officials who saw the report. It is the Communist Party that controls public opinion on all media platforms and the private sector should not take up the role, the officials said.
Alibaba owns about 30% of Nasdaq-listed Weibo Corp. and has been the largest customer of the social-media company, having contributed nearly $100 million in advertising and marketing revenue in 2019 to its platform, according to the most recent annual data available.
In June, the internet watchdog publicly reprimanded Weibo for what it called “interference with online communication” and asked it to rectify the situation. In November, Xu Lin, a vice-director of the Party’s central propaganda department, said in a public forum that China must “resolutely prohibit dilution of the party’s leadership in the name of [media] convergence, resolutely guard against risks of capital manipulating public opinion.”
He didn’t identify Alibaba by name during his speech but used the words that appeared in the cyber watchdog’s report.
Divesting its media interests isn’t necessarily a big negative for Alibaba, which could re-emerge from the regulatory onslaught in a more secure position with Beijing after giving up some noncore assets. It could also help steer the company clear of future political minefields as authorities maintain a tight grip on the media.
Alibaba isn’t the only Chinese tech giant that dabbles in media.
Tencent Holdings Ltd.
’s WeChat messaging service has become one of the primary ways in which ordinary Chinese people get news. Bytedance Ltd. operates popular news aggregator Jinri Toutiao, which employs artificial intelligence to push news to hundreds of millions of users.
It isn’t clear if any other tech companies will have to follow the same pattern as Alibaba in considering the disposal of media assets.
Alibaba’s media investments began before the company rose to international fame with its then record-breaking IPO on the New York Stock Exchange in 2014. Over the years, Alibaba and Ant purchased stakes in some of the country’s most popular media outlets, including business-focused Yicai Media Group and tech-focused news portals Huxiu.com and 36Kr.com.
One of the most prominent acquisitions was the South China Morning Post, which traces its roots to the era of British colonial rule in Hong Kong. Alibaba has also set up joint ventures or partnerships with powerful state-run media like Xinhua News Agency and local government-run newspaper groups in Zhejiang and Sichuan provinces.
Media outlets often met Alibaba’s overtures with enthusiasm, given the tech giant’s deep pockets and digital expertise. Since being bought by Alibaba in 2016, the Post has expanded its digital news offerings and editorial staff and completed a makeover of its Hong Kong headquarters.
Some journalists and readers worried that Alibaba, which has offices a few floors above the Post’s newsroom, would interfere with the paper’s coverage to please Beijing. But the newspaper at times published stories that appeared unfavorable to the Chinese leadership, including extensive coverage of Hong Kong’s 2019 and 2020 protests and Beijing’s growing control over the city.
Mr. Ma, explaining the reasons for his acquisition of the Post, said in a public forum in 2017 that he never interfered with newsroom operations and respected journalism.
“[We] must not let the media fall, must not let the media lose themselves, and must not let the media lose objective and rational communication because of money,” Mr. Ma said in the event, organized by Xinhua.
Media Empire
Media assets held by Alibaba include:
100% of the South China Morning Post, Hong Kong’s premier English newspaper.
Nearly 37% of Yicai Media Group, one of China’s most influential news outlets.
About 30% of Weibo, a Twitter-like social media platform. Its stake is valued at more than $3.5 billion.
6.7% of Bilibili, a video platform popular among younger Chinese people. Its stake is worth nearly $2.6 billion.
5% of Mango Excellent Media, a subsidiary of government-run Hunan TV. Its stake is worth about $819 million.
Nearly 5.3% of Focus Media, China’s largest offline advertising network. Its stake is worth nearly $1.2 billion.
Media assets held by Ant include:
16.2% of 36Kr, a U.S.-listed digital media outlet focused on technology. Its stake is worth $25 million.
Former 5.62% stake in Caixin Media, one of China’s most respected news sources. Ant sold its interest in 2019.
Sources: The Securities and Exchange Commission, Shenzhen Stock Exchange, National Equities Exchange and Quotations of China, National Enterprise Credit Information Publicity System of China, FactSet, Wind.
Note: Market values for U.S.-listed companies are as of March 12; for China-listed firms, as of March 15.
