Global investors value China’s Ant Group at over $200 billion – Sources

Some of Ant Group’s global investors have valued the Chinese fintech firm at over $200 billion based on its 2020 performance, said people with knowledge of the matter, offering a more sober estimate after the shelving of its IPO and forced restructuring.

The number is at least a third above Ant’s valuation after its last fundraising in 2018 when it emerged as the world’s most valuable unlisted technology company, yet is far short of the $315 billion it touted for what was set to be the world’s largest IPO.

Investor hopes for a massive windfall were dashed when regulatory scrutiny scuppered the $37 billion initial public offering (IPO) days ahead of Ant’s November listing. Regulator-mandated restructuring has since made some more conservative with their internal analysis.

Investors’ revised estimates of Ant’s valuation, which will determine their returns, is reported here for the first time.

Warburg Pincus LLC valued Ant at slightly over $200 billion at year-end based on 2020 earnings and comparable company analysis, said one of the people. The U.S. private equity firm sold part of its holding in early 2020 at a $190 billion valuation in a private trade, other sources said.

Another investor said its estimate, based on Ant’s latest financial figures, was not very different from that of Warburg.

Warburg declined to comment on Ant’s valuation and did not immediately respond to a request for comment on the stake trade.

Ant’s valuation and revised listing timeline are unclear as the Alibaba Group Holding Ltd affiliate has yet to finalise its restructuring plan.

Still, its business as of the October-December quarter was little affected by regulatory scrutiny, said one of the people, who declined to be identified as the matter was private.

Ant declined to comment.

RESTRUCTURING

The Hangzhou-based fintech giant is shifting its company structure to that of a financial holding firm following regulatory pressure to subject it to rules and capital requirements similar to those for banks.

Ant’s valuation could consequently suffer, analysts have said, as valuations are much higher for technology firms than financial companies.

Ant was regarded as a tech firm in its previous fundraising in 2018 when it raised $14 billion at a valuation of about $150 billion in the world’s largest single fundraising.

Investors included private equity firms Warburg, Carlyle Group Inc, General Atlantic and Silver Lake Partners LP, plus Singapore sovereign wealth fund GIC Pte Ltd and existing shareholders Boyu Capital and Primavera Capital Group.

At its IPO pricing, Ant’s valuation soared to about $315 billion, or more than 31 times its forecast 2021 net profit.

With the earnings impact of restructuring unknown, one investor said it now valued Ant at about the same as the 2018 fundraising. Another said it marked its Ant investment at cost, meaning it does not see any return from the deal for the time being.

Ant Group CEO Simon Hu resigns

(Reuters) – China’s Ant Group Chief Executive Officer Simon Hu has unexpectedly resigned amid a regulatory-driven overhaul of the financial technology giant’s business, the first top management exit since a scuppered $37 billion initial public offering.

Hu, who was named chief executive of the Alibaba Group Holding affiliate in 2019, will be replaced by company veteran and Executive Chairman Eric Jing, Ant said in a statement on Friday.

Hu’s exit from the company comes as Ant is working on plans to shift to a financial holding company structure following intense regulatory pressure to subject it to rules and capital requirements similar to those for banks.

That pressure abruptly scuttled Ant’s IPO last year, which would have been the world’s biggest.

Hu resigned for personal reasons, Ant said in a statement, without elaborating.

“Following the board’s thorough discussions, we have decided to respect Simon’s personal request and support him fully in his new mission,” Jing said in an internal memo, an excerpt of which was seen by Reuters.

Jing will continue in his current role as chairman, he said.

U.S.-listed shares in billionaire Jack Ma’s Alibaba dropped as much as 3.9% in the morning trade on Friday.

Hu’s departure is the first major management change since the IPO was scrapped. He was one of the key executives responsible for managing the company’s mega dual-listing in Hong Kong and Shanghai.

FINANCIAL PROBLEMS

Ma’s business empire has been at the centre of a crackdown following an Oct. 24 speech in which he blasted China’s regulatory system.

Regulators have since been tightening scrutiny of the country’s technology sector, with Alibaba taking much of the heat. The regulator launched an official anti-trust probe into Alibaba in December.

Ma, who is not known for shying away from the limelight, disappeared from the public eye for about three months, prompting frenzied speculation about his whereabouts. He re-emerged in January in a 50-second video appearance.

Ant’s financial holding structure is expected to weigh on its valuation, as the fintech firm was valued as a technology firm in its previous fundraising rounds. Typically, valuations are much higher on technology firms than on financial companies.

The change in management also comes days after some Ant staff expressed frustration on social media for not being able to sell the company shares they own after Chinese regulators abruptly halted the company’s market debut.

Jing told Ant employees that the company would review its staff incentive programmes and roll out some measures starting from April to help solve their financial problems, according to two people who saw the messages.

The listing in November of Ant, whose businesses include consumer lending and insurance products distribution, would have made some of the company’s employees millionaires or billionaires.

Although Ma has stepped down from corporate positions and earnings calls, he retains significant influence over Alibaba and Ant and promotes them globally at business and political events.

Hu joined Ant in 2005 and has worked in various roles in the group as well as at Alibaba, according to his LinkedIn profile.

Jing has been Ant’s executive chairman since 2018 and before that he held various positions at the company including president and chief operating officer, according to his profile on the World Bank website. He joined Alibaba in 2007.

China’s Ant seeks to ease staff concerns about selling company’s shares

China’s Ant Group is working on measures to help staff with “short-term liquidity problems”, its executive chairman said in internal messages, after the halting of the fintech giant’s $37 billion IPO dashed employees’ hopes of cashing in their shares.

The listing of the affiliate of Chinese e-commerce giant Alibaba Group Holding last November would have made some of the company’s employees millionaires or billionaires.

Eric Jing told Ant employees last week that the company would review its staff incentive programmes and roll out some measures starting from April to help solve their financial problems, according to two people who have seen the messages.

Some Ant employees recently expressed frustration on social media for not being able to sell the company shares they own after Chinese regulators abruptly halted Ant’s dual-listing, which was set to be the world’s largest, in November.

Jing made the comments in response to employee questions about Ant’s future on the company’s internal website, said the people, who declined to be named as they were not authorized to speak to the media.

The company’s share buyback programme for employees has been halted since July last year due to the planned initial public offering, one of the people said, which would have given them an opportunity to monetize their holdings.

Ant declined to comment.

The Wall Street Journal first reported the news.

“Our company will certainly become a public company and I’m very confident about it all along,” Jing was cited by the people as saying in the internal messages. “Our preparation work won’t stop.”

Ant is currently working on plans to shift to a financial holding company structure following intense regulatory pressure and to rein in some of its operations and subject them to rules and capital requirements similar to those for banks.

A group business structure overall, however, means that the company could proceed with the IPO within two years, Reuters has reported.

“This rectification won’t make Ant weak, but will make us healthier, with a greater stage for growth,” Jing said, without disclosing the details of the restructuring plan.

Ant Group will see ‘results’ if legal process after IPO halt followed: central bank governor

Ant Group will see results if the company follows the legal processes following the suspension of its initial public offering, according to China’s central bank governor Yi Gang.

Beijing has signalled that it wants to strengthen its oversight, particularly of technology firms looking to expand into the financial space, a reversal of its once laissez-faire approach.

The drive has spotlighted Alibaba’s fintech affiliate, Ant Group, whose record $37 billion listing was halted by Beijing in early November, with its executives called into meetings and told to expect more regulation.

“I’d say that you just follow the standard of legal instruction, you will have the result,” Yi said on Tuesday, speaking at a virtual meeting of the World Economic Forum.

Regulatory authorities are working to strike a delicate balance in their effort to fend off risk without discouraging innovation.

The legal framework for financial innovation has to be very clear, he also said, speaking in English.

Is the Ant Group shake-up a sign of things to come?

China’s central bank hauled in executives from Ant Group over the weekend, and ordered a major shake-up of the company’s operations.

The move comes about a month after regulators scuppered the company’s listing on the Hong Kong and Shanghai exchanges. 

Some see the move as a vengeful communist party lashing out at the company’s outspoken founder Jack Ma.

But analysts note that reforming the financial sector is a long-standing policy goal, and other companies could also end up in the crosshairs of regulators.

“Ant Financial is the first cab off the rank when it comes to these new requirements and an increased level of scrutiny,” said Michael Norris, research and strategy lead at AgencyChina. 

“While the talk about palace intrigue between Jack Ma and his various detractors is titillating, it does ignore that policy environment where slowing up the build-up of risk is clear and resolute as a priority.”

Ant Group is China’s biggest payments provider, with more than 730 million monthly users on its digital payments service Alipay. But it’s the company’s lending practices that appears to worry the regulators more.

Ant acts as a marketplace for loans. It takes a fee to match borrowers with banks, who then take on the risk.

What happened to Ant?

Over the weekend central bank officials met with executives from Ant Group, and ordered the company to “rectify” its lending, insurance and wealth management services.

According to People’s Bank of China (PBOC) Vice Governor Pan Gongsheng, regulators drew attention to Ant’s poor corporate governance, defiance of regulatory demands and its use of its market size to squeeze out competitors.

Ant was urged to return to its origins as a payments business, and to enhance transaction transparency and avoid unfair competition.

People's Bank of China
image captionPeople’s Bank of China

Mr Pan also said Ant should be properly licensed to operate a credit business, should establish a holding company, and must ensure capital adequacy.

Under draft rules published by the People’s Bank of China in November, online lenders must provide at least 30% of any loan they fund jointly with banks.

In other words, under the new rules Ant Group will be expected to behave a little more like a traditional lender.

Hangzhou-based Ant Group said in a statement it would establish a “rectification” working group and fully implement regulatory requirements.

Risky business

Mr Norris said it appears the regulators are worried that easy credit could mean investors will borrow on margin to make risky investments in shares.

This isn’t a new concern in China. Easy access to credit helped fuel share market turbulence in 2015, when some investors were unable to repay their margin loans after a share market rout.

Also, if Ant Group bears none of the risk, then its main incentive is to process as many loans as possible, with little regard to the effect they might have on the lending institutions that actually underwrite them.

“The regulators would much prefer the risk is shared between the platform and the financial institution, and that the financial institution has a greater oversight of the lending practices and the matching criteria that are going on,” Mr Norris said. 

“Pawn shops”

The Chinese regulators first moved to rein in Ant Group shortly before its planned Initial Public Offering (IPO) in early November.

The move came after Ant Group’s billionaire founder and controlling shareholder Jack Ma had criticised China’s state-dominated banking sector at a fintech conference in Shanghai.

Mr Ma likened China’s banks to “pawn shops” and lamented their lack of innovation.

The timing of the crackdown fuelled speculation that his speech had offended the top echelons of the communist party, who had responded by cracking down on Ant Group. 

Nearly two months later, the regulators still appear to be interested in Mr Ma. In addition to its moves against Ant Financial, last week China’s antitrust authorities said they had launched a probe into Mr Ma’s e-commerce platform Alibaba. 

He has been advised by the Chinese government to stay in the country, Bloomberg reported.

Alibaba Group's Beijing Headquarters

No-one is immune

But even if high ranking party officials bear a grudge against Mr Ma (something they’re unlikely to confirm publicly) that doesn’t mean the authorities don’t have legitimate concerns about the emerging financial technology sector. 

Ant might have been the first fintech company to be hauled before the regulators, but it’s unlikely to be the last. Many other large players have waded into the industry, including Tencent and Alibaba’s e-commerce competitor JD.com. 

Already, some of Ant Group’s competitors are changing the way they operate ahead of major changes in the rules. For example, online providers JD Digits, Tencent, Baidu and Lufax all stopped selling interest-bearing deposits on their platforms after Ant was forced by regulators to do the same. 

“I don’t think anyone’s immune at this stage, and certainly the principles by which Ant Group matches consumers and financial products is broadly similar to the way that Tencent does the same,” said Mr Norris.

Jack Ma’s Ant Group set for record $34bn stock market listing

Chinese financial technology giant Ant Group looks set to make the world’s largest stock market debut.

Ant, backed by Jack Ma, billionaire founder of e-commerce platform Alibaba, is to sell shares worth about $34.4bn (£26.5bn) on the Shanghai and Hong Kong stock markets.

Advisers to Ant set the share price on Monday amid reports of very strong demand from major investors.

The previous largest debut was Saudi Aramco’s $29.4bn float last December.

Ant, an online payments business, is only selling about 11% of its shares. But the pricing values the whole business at about $313bn. 

Mr Ma’s Ant shares are reportedly worth about $17bn, taking his net worth to close to $80bn and confirming him as China’s richest man.

Ant runs Alipay, the dominant online payment system in China, where cash, cheques and credit cards have long been eclipsed by e-payment devices and apps. As well as owning Alipay, which is estimated to have more than one billion users, Ant also offers wealth management, insurance and money transfer services.

The company is expected to make its dual listing in Shanghai and Hong Kong next week, underlining the latter exchange’s growing importance as a financing hub.

The Trump administration has threatened to limit Chinese firms’ access to US capital markets, a move that is part of the long-running trade row between Washington and Beijing. In response, China called on its flagship tech giants to list on domestic stock markets.

Chinese tech firms, including NetEase and JD.Com, have already raised billions by selling their shares via the Hong Kong stock market.

Chinese financial technology group Ant has unveiled plans for a stock market debut.

According to the Bloomberg news agency, Mr Ma told a conference in China on Saturday that the flotation would be of huge significance for Shanghai and Hong Kong. 

“This was the first time such a big listing, the largest in human history, was priced outside New York City,” he told the Bund Summit. 

“We wouldn’t have dared to think about it five years, or even three years ago,” said Mr Ma.

Major investors to have signed up to the share offering ahead of flotation, scheduled for 5 November, include Singapore state investor Temasek Holding and Abu Dhabi sovereign wealth funds GIC and Abu Dhabi Investment Authority.

Analysts said the flotation offered investors a chance to secure a slice of Asia’s fast-growing tech sector.

“Digital commerce and infrastructure platforms in Asia provide an unprecedented opportunity for Asian and global investors to be part of the next wave of value creation in Asia,” said Varun Mittal, an emerging markets expert at consultancy EY, in Singapore.

“Earlier this year, India saw a rush of international investors keen to invest in infrastructure and platforms ecosystem, which is being replicated in the Chinese ecosystem now.”