Jack Ma is no longer the controlling shareholder of Ant Group.
“There is really no positive news in the Chinese IT industry. Will it continue?”
About two weeks ago, I sighed with a Chinese VC (venture capital) person who called me for my year-end greetings. Due to the economic turmoil caused by the IT recession and the zero corona policy, we rarely hear good news about the economy. There are many bad stories, but if the situation continues to be “bad and bad,” people’s interest will fade. It’s been a rough year for VCs and for me, who has to write something here every week.
The Chinese IT industry, which had been enjoying its prosperity, plunged into winter without any warning in November 2020, when Alibaba Group’s financial subsidiary Ant Group, which was attracting attention from around the world as the largest IPO in history. Group” was forced to postpone its listing three days ago indefinitely. Jack Ma, the founder of Alibaba and Ant, who publicly “criticized” financial regulations in late October, was summoned by authorities and has since disappeared from the public stage.
After that, not only Ant, but also its parent company Alibaba, its rival Tencent, and the ride-hailing service DiDi, which gained great power by acquiring big data, the mega-IT, which has gained tremendous power, has been under pressure from the authorities one after another. entered and had his hands and feet tied up. On the other hand, IT companies involved in communications and semiconductors, such as Huawei, will be squeezed by the United States.
The global recession is looming large, and China is in internal and external turmoil due to shrinking external demand and domestic economic turmoil due to the zero-coronavirus policy. Even so, just when I thought that the IT companies that had driven innovation in China in the 2000s and 2010s would continue to be squeezed, big news about Ant, which was the epicenter of regulations, came in rapid succession at the end of the year.
Ma’s voting rights down from 53% to 6%
On January 7, Ant Group announced a corporate governance reform through a review of its capital relationship. The biggest highlight was that Mr. Ma was no longer a controlling shareholder with management rights, which was reported not only in China but also around the world.
Alipay, the predecessor of Ant, was born in 2004 as a payment service for Alibaba’s e-commerce platform, and was spun off from Alibaba in 2011. Alipay has more than 1 billion users, and the vast amount of data collected from them is used to score individuals’ creditworthiness and create innovative services in all areas of finance, including payments, loans, and insurance. For Mr. Ma, it is a business that can be said to be a “second founding” following Alibaba.
Ant’s shareholder structure has long looked like the diagram below. I won’t go into detail here, but in the diagram, Jing Xiandong (Ant Chairman and CEO), Hu Xiaoming (former Ant CEO), and Jiang Fang (Alibaba G Deputy Chief Personnel Officer) are the companies with substantial control. To exercise voting rights as his “coordinated action person,” Mr. Ma holds approximately 8.8% of shares, but effectively holds 53.46% of Ant’s voting rights through affiliates.
Jack Ma (Ma Yun) effectively controlled Ant Group.
After the renewal, the effect of the agreement regarding the “consensus action person” of affiliated companies was invalidated, and the following scheme was adopted. In addition to Mr. Ma, founder of Ant, Mr. I, chairman of Ant, the voting rights of 10 major shareholders, including Ant’s management team and employee representatives, were made independent and reviewed so that they would not interfere with each other. Ma’s voting rights will drop to 6.208% and no shareholder will directly or indirectly control Ant. Ant explained that “voting rights will be transparent and decentralized, contributing to healthy growth.”
Mr. Ma’s voting rights have fallen to the 6% range.
Separation of business, proceeding with management separation from Alibaba
The regulator’s main argument for holding back Ant’s IPO was that it “has never obtained a financial business license and is not supervised by the financial authorities, even though it is engaged in financial business.” Perhaps conscious of this criticism, Ant also changed its name from “Ant Financial” to “Ant Group” in June 2020 and announced a policy to push technology to the forefront rather than finance. It can be inferred that there was a tug-of-war going on between the authorities, Ant, and Alibaba behind the scenes.
In April 2021, financial regulators such as the People’s Bank of China and the China Banking Regulatory Commission, following the State Administration of Market Supervision’s imposition of a huge fine on Alibaba for violating the Antimonopoly Act, are demanding that Ant The content of anti-competitive measures was announced.
Following the authorities, Ant has mainly taken the following actions.
September 2021:Huabei, a retail financial services company, began providing consumer credit data to a database run by the People’s Bank of China.
End of 2021:Spun off “Hanauta” and “Yoriuta”, retail finance companies for consumers (because of a request from the authorities to separate settlement services (Alipay) and consumer financial services)
Mutual assistance insurance service between users “Sougou” ended. This is because they do not have an insurance business license.
July 2022:Four members of Ant’s management team, including Mr. I, will be removed from Alibaba’s partners (partners have strong authority, such as appointing Alibaba’s management team). The purpose is to separate the management of Ant and Alibaba.
Affiliated companies accept investment from state-owned enterprises
The market hopes to normalize relations between Ant and the authorities.
In fact, on December 30, 2022, there was a big movement that suggested a change in the attitude of the authorities.
The Chongqing financial authorities decided to raise the capital of Chongqing Ant Consumer Finance Company (hereinafter referred to as Ant Shukin) to 8 billion yuan (approximately 160 billion yen), which was established to take over Ant’s Huabei and Borbai businesses. , 1 yuan = 20 yen) to 18.5 billion yuan (approximately 370 billion yen).
The breakdown of the capital increase is that Ant, which holds a 50% stake, will newly invest 5.25 billion yuan (approximately 105 billion yen), maintaining its investment ratio and position as the largest shareholder, and the Hangzhou Municipal People’s Government will take over the actual management. Hangzhou Gold Throw Digital Technology Group, which has the rights, will invest 1.85 billion yuan (about 37 billion yen) and become the second shareholder with a 10% stake.
The state-owned company’s investment and becoming a major shareholder was seen as a sign of the normalization of relations between Ant and the authorities. A week later, Ant announced its new governance overhaul.
Another important signal came on January 7th.
Guo Shuqing, the head of China’s financial supervisory board, who also serves as chairman of the China Banking and Insurance Regulatory Commission and secretary of the People’s Bank of China Party, said that the financial operations of 14 Chinese platformers have been “basically corrected.” Indicated.
Although the specific company name was not given, it was reported on the same day as Ant’s governance reform, and the speculation that Ant’s IPO, which had been frozen, would resume.
At the Central Economic Work Conference, which was held on December 15-16, 2022, to confirm the economic management policy for the following year, it said, “We will focus on the growth of the digital economy, raise the level of supervision and management, and let platformers play a leading role. It was recommended that the government should create jobs nearby and support international competition.”
Since the Chinese New Year (January 22nd) is the beginning of the fiscal year, China will put an end to the “correction” of platformers and fintech companies within the year, and the economic slump due to the zero-corona policy and the subsequent explosion of infections. You can also see the intention to make it play a role as.
The Hong Kong Stock Exchange and others include “there has been no change in the beneficial controlling shareholder in the past year” as a condition for listing. Due to the deterioration of the market environment, the market capitalization cannot be expected compared to 2020. Ant’s IPO is a big step forward, but some say it won’t happen before the end of the year. Mr. Ma, who was a hero in China, is still disappearing.
Still, there is no doubt that China’s IT industry has seen a bright light.
Sanae Urakami: Economic journalist, Hosei University MBA practitioner lecturer, English/Chinese translator. He graduated from the School of Political Science and Economics at Waseda University. After working for Nishinippon Shimbun for 12 and a half years, he stayed in Dalian, China for a government-sponsored doctoral program (business administration) and as a lecturer at a university for ethnic minorities for 6 years. Latest issue “New Corona VS China 1.4 billion peopleUnmarried mother for 13 years, 42 years old and married for the first time with a child.
Source: BusinessInsider
Emma Warren is a well-known author and market analyst who writes for 24 news breaker. She is an expert in her field and her articles provide readers with insightful and informative analysis on the latest market trends and developments. With a keen understanding of the economy and a talent for explaining complex issues in an easy-to-understand manner, Emma’s writing is a must-read for anyone interested in staying up-to-date on the latest market news.