The firm has unveiled a plan to buy back shares valued almost 70% below its IPO estimate in 2020, a move that has raised eyebrows in investor circles.
But this ambitious billion-dollar buyback is set against a backdrop of regulatory turmoil that begs the question: Is this the calm before another storm?
A billion-dollar move amid turbulence
Ant Group has positioned itself to repurchase a staggering $6 billion worth of shares, pegging the company’s value at a humble $78.5 billion. This move surfaced just 24 hours after Chinese financial overseers imposed a nearly $1 billion fine on the company, culminating a prolonged period of scrutiny.
To comprehend the depth of Ant Group’s predicament, we must backtrack to November 2020 when Jack Ma publicly criticized Chinese regulators and state-owned banks.
This instigated a swift and severe reaction from Beijing, propelling a crusade to contain corporate heavyweights’ influence.
The result was a coerced restructuring of Ant Group, severing half of its lucrative lending operations to external investors, halving the assets of its flagship money market fund from its apex, and granting the government more control over its vast user data.
Ant Group vs. regulatory forces
Ant Group’s restructuring has been a tale of fierce regulatory combat, having to endure an onslaught of penalties for various violations.
Alipay, the company’s digital payments unit, bore the brunt of this disciplinary action, incurring fines close to Rmb3bn for clearing, due diligence, and consumer protection lapses. The fintech behemoth conceded to the penalties, vowing to bolster its compliance governance.
The tech magnate Jack Ma found himself in the eye of this storm, ultimately relinquishing control of Ant Group earlier this year, a company he spun off from Alibaba in 2011.
This strategic retreat seemingly mitigated the most severe outcomes for both himself and Ant Group, according to those close to financial regulators.
As the dust begins to settle on this regulatory battlefield, attention is shifting towards “normal supervision” of conglomerates like Ant Group.
Yet, the tremors from this shakeup still reverberate within the fintech ecosystem, prompting concerns that curbing China’s tech giants might limit their global operations.
Meanwhile, Jack Ma has been making a quiet comeback, appearing more frequently in mainland China and resuming a low-profile role at Alibaba, steering the e-commerce titan towards a turnaround. With this return, Alibaba’s shares saw an almost 6% surge in New York trading.
Peering beyond this tumultuous period, the future holds promise for Ant Group. The company is gearing up to relaunch its public listing efforts next year, with its credit scoring venture and its financial holding company status still under scrutiny.
While the regulatory storm appears to be subsiding, Ant Group’s journey back to “normal business” is still ongoing, according to Dong Ximiao, a financial regulation expert at Merchants Union Consumer Finance.
The company’s decision not to sell to the buyback and allocate the repurchased stock to its employee incentive program indicates a confident stride towards its future.