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—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
Alibaba’s Hong Kong-listed shares were about 1% lower Tuesday — after earlier falling more than 9% —following unconfirmed rumors that linked the company’s founder Jack Ma to a national security investigation.
Chinese state media reported earlier in the morning that the Hangzhou security bureau on April 25 took “criminal coercive measures” on an individual with the last name Ma over suspicion of using the internet to endanger national security.
CNBC was unable to confirm the Chinese report. Alibaba and the Jack Ma Foundation did not immediately respond to a request for comment.
Subsequent state media updates indicated the person had a first name with two Chinese characters, rather than one. Jack Ma’s first name in Chinese only has one character.
Such “coercive measures” can include detention, arrest or bail. The security bureau is also investigating the case, state media said.
Jack Ma stepped down from Alibaba’s board in 2020 and no longer has executive responsibilities, the company said in a July 2021 statement.
Nobody knew until last month that Joseph Chung-Hsin Tsai — better known as Joe Tsai — was the “mystery buyer” who dropped $157 million this spring on two massive condos at 220 Central Park South, the most expensive apartment building in the country.
So far, keeping a relatively low profile and understanding international office politics has worked out well for Tsai, said to be worth at least $12 billion. The 57-year-old is the co-founder of Alibaba (China’s version of Amazon), the owner of the Brooklyn Nets and a friend of the Chinese Communist Party.
The same can’t be said for Jack Ma, his flamboyant onetime partner and the creative genius behind Alibaba. Ma has barely been seen in public for the past 10 months. His wings have been clipped, possibly permanently, by officials after Ma publicly dissed his country’s banking system last fall. He is reportedly being “re-educated” by the Chinese Communist Party.
“Tsai is savvy — savvier than Jack Ma,” Peter Navarro, author of “Death By China: Confronting the Dragon,” told The Post.
Joe Tsai’s American wife, Clara (far left), is raising their three kids in La Jolla, Calif.AFP/Getty Images
“In America you get canceled for saying the wrong thing. In China you get canceled for becoming a bigger celebrity than [President] Xi Jinping. Tsai realized that; Jack Ma did not,” Navarro said.
Tsai, who was born in Taiwan and educated in the US with citizenship in Hong Kong and Canada, is currently gallivanting around the world. He splits his time between a luxe home in Hong Kong, an oceanfront estate in La Jolla, Calif., and the new digs on Billionaires’ Row.
In addition to the Nets, Tsai and his wife, Kansas-born Clara Wu Tsai, co-own the WNBA’s New York Liberty, the San Diego Seals lacrosse team and the Barclays Center, where the Nets play their home games.
“Tsai is reducing his China risk when he buys the Nets and Central Park South. It’s a smart thing to do,” Gordon Chang, author of “The Coming Collapse of China,” told The Post. “Xi is going after Chinese tech companies like never before and no one knows how it’s going to end up.”
Meanwhile, Ma is thought to be under what amounts to house arrest in China, according to experts.
“He’s lying low right now. I talk to him every day,” Tsai told CNBC in June. “He’s actually doing very, very well. He’s taken up painting as a hobby.”
Ma built Alibaba into a $500 billion powerhouse and turned himself into the kind of iconic frontman more common among American and UK billionaires. At one point, his face was reportedly more recognizable in China and around the world than Xi’s.
Ma hung out with movie stars like Tom Cruise and Daniel Craig and top politicians all over the world, and became known for his wild performances — dressing as Michael Jackson or Elton John — at Alibaba functions.
His high life came to a halt when he gave a now-infamous speech at a 2020 conference, calling out China’s state-owned banks and regulators for being backward. Among other things, Ma slammed their “pawnshop mentality.”
Tsai and wife own the Brooklyn Nets and joined star player Kevin Durant for a WNBA game in July. NBAE via Getty Images
“Today’s financial system is the legacy of the Industrial Age,” Ma said. “We must set up a new one for the next generation and young people.”
His remarks came days before Ma’s financial tech firm Ant Group was readying what would have been the world’s biggest IPO. In response, Beijing pulled the plug on the deal and since then has relentlessly gone after Ma’s massive empire, reducing it by half — levying antitrust fines against Alibaba and almost eviscerating Ant by dividing it up with new partners.
The less colorful Tsai, on the other hand, has never been more successful.
It hasn’t hurt that he seems to know which masters to bow to. Last October, Tsai responded to a tweet from Houston Rockets general manager Daryl Morey supporting protesters in Hong Kong fighting the increasing overreach of the mainland.
While flying private from New York to Shanghai for a Nets game, Tsai wrote an astonishing “letter to NBA fans” that he posted on Facebook. In it, he referred to the Hong Kong protests as a “separatist movement.”
“The one thing that is terribly misunderstood, and often ignored, by the Western press and those critical of China is that 1.4 billion Chinese citizens stand united when it comes to the territorial integrity of China and the country’s sovereignty over her homeland,” he wrote. “This issue is non-negotiable.”
It was recently revealed that Tsai spent $157 million on two pads at 220 Central Park South.Matthew McDermott
From a business perspective, Tsai was correct in trying to do damage control. Sources told ESPN that the NBA lost between $150 million and $200 million in revenue when Chinese officials yanked sponsorships and airtime after the Morey tweet.
But the irony in Tsai’s defense of China and, by extension, the Chinese Communist Party, is that he comes from a family who fled it.
Tsai’s paternal grandfather, an adviser to the nationalist Kuomintang (KMT) government, left Shanghai for Taiwan in 1948 with his family. They were part of a mass exodus after the Communists won the civil war.
At 13, Tsai was sent from his home in Taipei to boarding school in Lawrenceville, NJ. He then went on to graduate from Yale University and Yale Law School. His parents were reportedly made naturalized citizens of Canada in the 1970s, according to a source, which is apparently why Tsai has Canadian citizenship. But seemingly, none of the family ever lived in Canada.
Tsai is based in Hong Kong and visits his wife and three kids — all American citizens — in the US often, a source familiar with the situation told The Post.
He and Clara met in 1993 when Tsai worked at the Sullivan & Cromwell law firm and she was a senior manager and vice-president at American Express. They married in 1996.
“My first job after law school was in New York. I met my wife, Clara, here so New York to me is my second home,” Tsai told The Post in 2019.
Alibaba creator Jack Ma, Tsai’s onetime business parter, is said to be under house arrest after angering Chinese officials.REUTERS
By 1999 the couple had moved to Hong Kong, where Tsai was a $700,000-per-year principal at a private equity firm. That year, a friend introduced him to Ma — a former English teacher with a big idea about getting hundreds of Chinese companies online so they could sell their wares to the world.
As the story goes, Tsai was so impressed with Ma’s vision that he was ready to leave his job. But the feeling wasn’t immediately mutual. Tsai reportedly had to return more than once to meet with Ma but it wasn’t until he brought Clara that Tsai clinched the deal. By several accounts she is his best asset.
Clara has a bachelor’s degree in international relations and a master’s degree in international policy studies from Stanford as well as an MBA from Harvard.
“Joe Tsai’s smart, but his wife is always the smartest person in the room,” someone who has worked with them told The Post. “She seems to have an innate ability to be able to read landscapes well and really understand events. She comes across like a futurist.”
Clara has worked on her pet cause, prison reform, with Kim Kardashian. She and Tsai have donated hundreds of millions of dollars to charities and universities in recent years. They made gifts to Stanford ($250 million) and Yale (reportedly $800 million) under the rubric of “neuroscience” — which involves futuristic brain technology and is a favored investment of billionaires including Elon Musk and Google’s Ray Kurzweil.
But for all Tsai’s philanthropy, some think he is a traitor to his people.
Many supporters of Hong Kong protesters, including now-jailed Jimmy Lai, publisher of the now-shuttered Apple Daily, are disappointed by Tsai’s defense of the Chinese Communist Party’s heavy-handed influence over Hong Kong.
“If Joe Tsai would sell HK, he’d sell Taiwan, despite the island sheltering his family from potential death 70 years ago,” Catie Lilly, a Taiwanese-American historian, tweeted in 2019.
Which is another way of saying, according to some experts, that Tsai knows which way the wind is blowing and knows how to harness it.
“Tsai, frankly, is a whole lot shrewder than Ma,” Craig Singleton, a China expert at the Foundation for Defense of Democracies, told The Post.
“Tsai is unabashedly supportive of the Chinese Communist Party’s policies, including its recent security crackdown in Hong Kong,” Singleton added. “Having benefited from a close working relationship with the ruling party, Tsai understands the importance of going along to get along.”
The crackdown on technology companies by Beijing is “backfiring” on China, as U.S. lawmakers call for oversight on Chinese firms looking to list stateside, according to an academic from the Center for Strategic and International Studies.
Fears over regulatory scrutiny on Chinese tech companies are growing again, after China cracked down on ride-hailing app Didi last weekend. Authorities ordered app stores to remove its Didi’s app for download — days after the Chinese company launched its IPO in the U.S.
Chinese regulators alleged that Didi had illegally collected users’ personal data.
Since then, China has opened a cybersecurity review into three more Chinese companies listed in the U.S.
Beijing is treading a “delicate balance” of controlling their tech giants while having to ensure they can still list overseas, according to Jude Blanchette, Freeman Chair in China Studies at the center.
“It already is backfiring in the sense that the actions that Beijing has taken especially over the weekend, these are … leading to lawmakers here in the United States accelerating their calls for additional oversight over Chinese companies listing in the United States,” he told CNBC’s “Squawk Box Asia” on Thursday.
Beijing’s walking a delicate balance here of trying to essentially bring these companies to heel with regulatory actions, but ensuring that they can still selectively IPO overseas.
Jude Blanchette
Freeman Chair in China Studies, CSIS
Republican Sen. Marco Rubio told The Financial Times in a statement Wednesday that it was “reckless and irresponsible” to allow Didi — an “unaccountable Chinese company” — to sell shares on the New York Stock Exchange.
Since China’s crackdown over the weekend, Didi shares in New York have tumbled almost 28%.
“As a blunt reality, if the United States starts turning away IPOs here … you know the Hong Kong market, Star market, Shanghai can’t pick up the slack in terms of IPO pipeline,” said Blanchette. “So Beijing’s walking a delicate balance here of trying to essentially bring these companies to heel with regulatory actions, but ensuring that they can still selectively IPO overseas.”
Read more about China from CNBC Pro
Qi Wang, CEO of Hong Kong-based MegaTrust Investment, however, said this isn’t necessarily a clampdown “or some kind of suppressive move.”
China probably “very much” wants these companies to succeed still, he told CNBC on Thursday, adding that what’s happening now is really a normalization of the internet space.
“To set the context, remember Chinese internet space was largely unregulated before, and the government has only been adding regulation in the last, maybe five years,” he said. “We’re moving from almost no regulation in internet to more regulation. Of course during this transition, the pressure may seem high because (of) the low base.”
In 2020, 30 China-based IPOs in the U.S. raised the most capital since 2014, data from Renaissance Capital showed.
As of late April, about 60 Chinese firms were still planning to go public in the U.S. this year, according to the New York Stock Exchange.
Politics vs commercial interests
Throughout the past 30 years of opening up the country, China has repeatedly needed to make examples of companies to drive this message across: There’s a “wide degree of latitude” for enterprise and money making, but fundamentally, one has to be aware of where the political lines are, said Blanchette.
“The phrase is, ‘Kill the chicken to scare the monkey,'” he said. “With the companies that have come up under scrutiny recently, there is — from Beijing’s perspective — a political ‘sin,’ that the company has transgressed.”
While there’s absolutely a regulatory case for why Beijing is bringing more scrutiny on these companies, it’s inseparable from the political case.
Freeman Chair in China Studies, CSIS
Blanchette noted that the speech Alibaba founder Jack Ma made last year was the “proximate cause that launched all of this.”
Ma had made a speech in Shanghai last October, blasting China’s regulatory system for stifling innovation. Following that speech, he disappeared from the public eye for a period of time, and it also led to the suspension of a mega IPO of Alibaba’s fintech arm, Ant Group.
“While there’s absolutely a regulatory case for why Beijing is bringing more scrutiny on these companies, it’s inseparable from the political case,” Blanchette added.
Blanchette also warned that all this regulatory scrutiny “is not going away.”
“This is the permanent reality, I think, of a newly energized regulatory apparatus in Beijing, which sees the degree of control these tech companies have gained in the market domestically as being untenable,” he said.
— CNBC’s Evelyn Cheng contributed to the reporting.
A trader works on the floor of the New York Stock Exchange (NYSE) after the opening bell of the trading session in New York, U.S., March 13, 2020.
Lucas Jackson | Reuters
GUANGZHOU, China — Major dual-listed Chinese technology shares trading in Hong Kong were hammered on Thursday amid fears that some companies could be de-listed in the U.S.
Hong Kong shares of U.S.-listed Chinese tech stocks fell sharply. Alibaba was down over 4% at 1:04 p.m. Hong Kong time, Baidu tanked over 8%, JD.com fell over 4% and NetEase was nearly 3% lower.
It comes one day after the U.S. Securities and Exchange Commission (SEC) adopted a law called the Holding Foreign Companies Accountable Act, which was passed by the administration of former President Donald Trump.
Certain companies identified by the SEC will require auditing by a U.S. watchdog. These companies will be required to submit certain documents to establish that they are not owned or controlled by a governmental entity in a foreign jurisdiction.
Chinese companies will have to name each board member who is a Chinese Communist Party official, the SEC said Wednesday.
The U.S. regulator could stop the trading of securities that fall foul of its rules.
Chinese technology companies are not only under pressure from the delisting threat abroad, but also concerns over a stricter regulations at home. Beijing has looked to reign in the power of technology giants and establish new rules in areas from financial technology to e-commerce.
While the Chinese government’s crackdown started with billionaire Jack Ma’s empire, including the suspension of the mega initial public offering of Ant Group, there are signs that Beijing’s targets could extend beyond Ant.
Reuters reported this week that Tencent founder Pony Ma met with Chinese antitrust officials this month. Tencent is only listed in Hong Kong and its shares were more than 2% lower at around 1:17 p.m. Hong Kong time.
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.
HANGZHOU, CHINA – NOVEMBER 13: Alibaba founder Jack Ma attends the 5th World Zhejiang Entrepreneurs Convention at Hangzhou International Expo Centre on November 13, 2019 in Hangzhou, Zhejiang Province of China.
VCG | Getty Images
GUANGZHOU, China — Jack Ma, Alibaba’s high-profile founder appears to be on the wrong side of the Chinese government, sparking a chain of events that has upped regulatory scrutiny on the e-commerce giant and cast uncertainty over its future.
Even after Alibaba reported December-quarter earnings above expectations, analysts and experts have warned that Ma’s friction with Beijing could hurt growth.
“Investors are looking at Alibaba with a much more careful eye after having been attracted by the growth story and the founder’s global profile,” Rebecca Fannin, author of “Tech Titans of China,” told CNBC by email.
“The current frictions are a new reality for investors who may not have carefully considered how the company’s rise as a powerful tech titan could be a threat to the status quo.”
It began in October when Ma made some negative comments about Chinese financial regulators just days ahead of the initial public offering (IPO) of Ant Group in Shanghai and Hong Kong, which would have been the world’s biggest. Ma also founded Ant Group and Alibaba owns about a third of the company.
There are two major concerns now. First, that Ant Group could be forced to restructure and even scale back some of its businesses like lending which has driven its growth. Such moves could seriously slash its valuation. The second concern is whether regulators might force Alibaba to break up or change parts of it core commerce business, which is its biggest profit driver.
“For now the greatest risk seems to be around investors’ confidence in the Alibaba brand and ecosystem,” Neil Campling, head of tech, media and telecom research at Mirabaud Securities, told CNBC by email.
“But if there is tighter regulation for the core drivers of the Alibaba platform then it could certainly stunt the growth of Alibaba. After all innovation and intricate weaving of the different aspects of the ecosystem combine to bring economies of scale and growth.”
Campling has a long-term buy rating on Alibaba’s stock.
Just ‘noise’ for long-term investors
Fannin believes Ma’s friction with Beijing will “ease up” but it will take some “agility on Alibaba’s part to deal with government pressure, changing consumer needs in a digital economy, and investor concerns.”
Alibaba’s U.S.-listed stock has been under pressure since the Ant Group IPO was pulled, falling from a record closing high of $317.14 on Oct. 27 to $254.50 at the close on Tuesday, a nearly 20% drop.
But some analysts and investors remain bullish.
Mizuho increased its price target on the stock from $270 to $285 on Tuesday saying the “stock (is attractive with the regulatory overhang mostly priced in.”
Matthew Schopfer, head of research at Infusive, an asset manager which is invested in Alibaba, said that the recent concern around the tech giant “will prove to be noise for the long-term investor.”
“Alibaba is a leading example of China’s technological capabilities and we do not expect the government to permanently damage the business. Additionally, heightened regulation will only further entrench the scale players like Alibaba,” Schopfer told CNBC by email.
“When we get to the other side of these regulatory headwinds, we think the market will again focus on Alibaba and its platforms as a critical part of the Chinese consumer’s everyday life and a major beneficiary from growth in Chinese spending power and the increasing digitalization of consumption.”
Signage for Alibaba Group Holding Ltd. covers the front facade of the New York Stock Exchange November 11, 2015.
Brendan McDermid | Reuters
Alibaba will be taking advantage of the low interest rate environment in the U.S. right now by issuing the bonds.
The company said the proceeds will be used for general corporate purposes, including working capital needs, repayment of offshore debt and potential acquisitions of, or investments in, complementary businesses.
So-called “sustainability notes” will also be issued with the proceeds going toward green projects such as renewable energy, the company said.
Citigroup, Credit Suisse, Morgan Stanley, J.P. Morgan and CICC are the underwriters for the deal.
