Ant Group founder Jack Ma to give up control in key restructuring

Ant’s $37 billion IPO, which would have been the world’s largest, was canceled at the last minute in 2020, leading to a forced restructuring of the financial technology behemoth and speculation the Chinese billionaire would have to cede control.

While some analysts have said a relinquishing of control could clear the way for the company to revive its IPO, the change, however, is likely to result in a further delay due to listing regulations.

China’s domestic A-share market requires companies to wait three years after a change in control to list. The wait is two years on Shanghai’s Nasdaq-style STAR market, and one year in Hong Kong.

Ma only owns a 10% stake in Ant, an affiliate of e-commerce giant Alibaba Group Holding Ltd, but has exercised control over the company through related entities, according to Ant’s IPO prospectus filed with the exchanges in 2020.

Hangzhou Yunbo, an investment vehicle for Ma, had control over two other entities that own a combined 50.5% stake of Ant, the prospectus showed.

Ant said that Ma and nine of its other major shareholders had agreed to no longer act in concert when exercising their voting rights, and would only vote independently. It added that the shareholders’ economic interests in Ant will not change as a result of the adjustments.

Ma previously possessed more than 50% of voting rights at Ant but the changes will mean that his share falls to 6.2%, according to Reuters calculations.

Ant also said it would add a fifth independent director to its board so that independent directors will comprise a majority of the company’s board. It currently has eight board directors.

“As a result, there will no longer be a situation where a direct or indirect shareholder will have sole or joint control over Ant Group,” it said in its statement.

Reuters reported in April 2021 that Ant was exploring options for Ma to divest his stake in Ant and give up control.

The Wall Street Journal reported in July last year, citing unnamed sources, that Ma could cede control by transferring some of his voting power to Ant officials including Chief Executive Officer Eric Jing.

Ant’s market listing in Hong Kong and Shanghai was derailed days after Ma publicly criticised regulators in a speech in October 2020. Since then, his sprawling empire has been under regulatory scrutiny and going through a restructuring.

Ant operates China’s ubiquitous mobile payment app Alipay, the world’s largest, which has more than 1 billion users.

Once outspoken, Ma has kept an extremely low public profile in the past two years, as regulators reined in the country’s technology giants and did away with a laissez-faire approach that drove breakneck growth.

“Jack Ma’s departure from Ant Financial, a company he founded, shows the determination of the Chinese leadership to reduce the influence of large private investors,” said Andrew Collier, managing director of Orient Capital Research.

“This trend will continue the erosion of the most productive parts of the Chinese economy.”

As Chinese regulators frown on monopolies and unfair competition, Ant and Alibaba have been untangling their operations from each other and independently seeking new business, Reuters reported last year.

Ant said on Saturday that its management would no longer serve in the Alibaba Partnership a body that can nominate the majority of the e-commerce giant’s board, affirming a change that started mid-last year.