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Jack Ma hands over control of fintech giant Ant Group: What it means

Chinese billionaire Jack Ma, founder of Ant Group, is relinquishing control of the financial technology giant after years of heavy regulatory crackdowns.

An official statement from Ant Group stated that after the change, no one will have overall control. Until now, Ma, who has been absent from the company’s management for years, held 50.52 percent of its voting shares through Hangzhou Yunbo and two other companies, allowing him to determine its direction.

After his decision to relinquish that control, he will own just over 6% of Ant Group’s shares, and decisions about the fintech giant will be made by a 10-member board.

In it, Ma will have one vote, while others will go to the company’s management, employee representatives and others.

The statement said the adjustment to voting rights aims to make the company’s shareholder structure “more transparent and diversified”. They emphasize, however, that the castings will not lead to a change in the economic interests of any Ant Group shareholder.

According to market strategist Redmond Wong of Saxo Markets, Ma’s decision to cede control of Ant and other businesses was negotiated with Chinese authorities, according to Bloomberg.

This change, according to Wong, will help calm the situation around the business group, removing some uncertainties and paving the way for the development and expansion of its operations. He also believes that this move will also improve investor sentiment towards Chinese technology companies.

The news has already sparked reactions in markets, with shares of listed Chinese companies in which Ant Group is a major shareholder rising on Monday.

The most significant jump was in the Hong Kong-listed shares of Alibaba, which increased in value by 7%. Growth was also seen in those of Longshine Technology Group Co Ltd, Jilin Zhengyuan, Shanghai Golden Bridge Infotech Co, Orbbec Inc and Hundsun Technologies.

Ant indirectly owns stakes in these companies ranging from over 20% to just over 5%.

Jack Ma, 57, a former English teacher, founded e-commerce giant Alibaba in 1999, the company becoming the foundation of his future financial empire. Over time, he built the Alipay payment network with over 1 billion users, and then grew it into an investment platform and a major micro-lending business.

In 2014, Alipay was spun off into a separate company called Ant Group Services to develop this financial and investment business. Thus, by the end of the decade, Ant was expected to be valued at more than $300 billion if it decided to go public.

In early 2020, however, the company came under the crosshairs of the government in Beijing.

Chinese regulators have launched a campaign to reduce the influence and power of companies in the technology sector. According to some analysts, it was a direct attempt by the government to “humiliate” a company that had become too powerful and a business leader who had become too outspoken.

The actions against Ant Group came amid outspoken criticism by Ma of the country’s banking sector. In his remarks, he commented that traditional banks in China had a “pawnshop mentality”.

The businessman appeared in a video feed for the annual forum of the Rural Teachers' Initiative after weeks of speculation that he had disappeared from public life

During a financial conference in November 2020, he also extolled the virtues of digital banking and stressed that future lending decisions should be based on data, not collateral.

Following this criticism, Ant Group’s planned IPO was abruptly halted, and Ma literally disappeared from public events for about three months, sparking speculation about his whereabouts.

In January 2021, he eventually appeared in a pre-recorded address for the annual forum of his charitable foundation-sponsored “For Rural Teachers” initiative, in which he pointed out that Chinese entrepreneurs should serve the authorities’ shared vision of achieving of the common good for the country.

At the time, many pointed out that the businessman appeared to be a hostage reading the demands of his captors in a video.

The effect, however, was that many of his fellow tech executives and company owners gave up their official corporate positions and increased charitable giving to align with President Xi Jinping’s vision of achieving “shared prosperity.”

Meanwhile, Ant has focused on revamping its business operations to appease regulators. Within this framework, the capital collateral for the consumer credit company’s subsidiary was increased.

According to many analysts, this can be seen as a signal of progress in the company’s restructuring and is the removal of an obstacle in its quest to obtain a financial holding license.

After these changes, the company can now grant loans for about 400-500 billion yuan, according to Bloomberg calculations.

"Jack Ma used to support the 12-hour work day 6 days a week by speaking in Chinese. That was the message for us. Now talk about "three working days a week, four hours a day", speaking in English. This message is for foreigners"commented a user on the Chinese social network Weibo.

It also initiated the building of firewalls in the ecosystem that once allowed the company to direct traffic from the Alipay payment platform to services such as wealth management and consumer lending.

The current changes at Ant Group and the redistribution of voting rights mean that the company will have to wait longer for its long-awaited return to the market as a public company.

In the rules of the Shanghai Stock Exchange, there is a requirement for companies that want to be listed as public that they cannot have made changes in their control bodies in the last two years. For the Hong Kong Stock Exchange, this waiting period is one year.

As for Jack Ma himself, he is currently out of China. Months ago he was spotted visiting spas and skiing in Japan, while a few days ago there were posts on social media that he was in Thailand visiting local restaurants.

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