Financial News

What’s next for Jack Ma’s Ant Group after China orders revamp?

Products You May Like

Article content

HONG KONG — China has imposed a sweeping restructuring plan on Jack Ma’s Ant Group, the fintech conglomerate whose record $37 billion IPO was derailed by regulators in November, that will see the group become a financial holdings company among other things.

Ant, valued at around $315 billion at its IPO pricing, is also exploring options for founder Ma to divest his stake and give up control, as meetings with regulators signaled the move could help draw a line under Beijing’s scrutiny of its business, Reuters exclusively reported on Saturday.

Here is a look at what the company needs to do in the near-to-medium term as a result of the revamp:


New regulation requires fintech platforms to own 30% of all the loans that they co-lend with banks.

Brokerage Jefferies estimated in a report last week that Ant will need 13.4-20.1 billion yuan ($2-$3 billion) of capital to meet the minimum capital adequacy ratio for consumer finance companies. A third to half of Ant’s 1.7 trillion yuan consumer loans are in the co-lending model, Jefferies estimates.


It will be tough for Ant to inject more capital into its consumer finance company of which it owns only 50%, brokerage Macquarie has said.


Story continues below

This advertisement has not loaded yet, but your article continues below.

Article content

Also, then Ant will have to convince other shareholders to come up with more capital to maintain shareholding percentages, said a Hong Kong-based analyst with a U.S asset manager which had subscribed to Ant’s halted IPO.

If that is not possible, any potential shareholding change will require negotiations on the company’s valuation which Ant might not want to get to, the analyst added.

One Ant investor, however, told Reuters that the potential capital shortfall would be well within Ant’s means and that it would not need to raise more money from outside investors.

Ant declined to comment.

The analyst and the investor spoke on condition of anonymity as they were not authorized to speak to media.


It is too early for analysts to come up with a new valuation estimate based on Ant’s revamp plan as more details are needed.

Some investors told Reuters they are optimistic that Ant will not be valued as cheaply as a Chinese bank, given the scope of its business and the technology and data power it possesses in the world’s second-largest economy.

Major lenders in China’s main banks stock index trade at 5-12 times forward earnings and 0.4-1.7 times their forward book value, Eikon data shows. Ant would be worth $33 billion if priced at one time book value based on its net assets reported last year, according to Reuters Breakingviews calculations.

Some global investors valued Ant at over $200 billion based on its 2020 performance, Reuters has reported.


Story continues below

This advertisement has not loaded yet, but your article continues below.

Article content


It is unclear how Ant is going to break up its payment business from its credit products Jiebei and Huabei.

Jiebei and Huabei are currently embedded within Alipay and rely on the mobile payment app for user traffic.

Any de-link would reduce users of the credit products and potentially affect Ant’s loan quality if data access to Alipay would somehow be limited or affected, the Hong Kong-based analyst said.


Ant has said it will set up a personal credit reporting company and apply for a personal credit reporting license.

It is already a shareholder in Baihang Credit, one of the only two credit agencies licensed by the central bank.

Macquarie analysts believe the People’s Bank of China may not grant Ant a license for its own credit company, while Jefferies said Ant may have to partner with a state-owned company to set up the agency. (Reporting by Kane Wu; Editing by Sumeet Chatterjee and Himani Sarkar)


Story continues below

This advertisement has not loaded yet, but your article continues below.

In-depth reporting on the innovation economy from The Logic, brought to you in partnership with the Financial Post.


Postmedia is committed to maintaining a lively but civil forum for discussion and encourage all readers to share their views on our articles. Comments may take up to an hour for moderation before appearing on the site. We ask you to keep your comments relevant and respectful. We have enabled email notifications—you will now receive an email if you receive a reply to your comment, there is an update to a comment thread you follow or if a user you follow comments. Visit our Community Guidelines for more information and details on how to adjust your email settings.

Products You May Like

Articles You May Like

Wednesday’s Jenna Ortega Debuts Edgy New Look
Review: Tincup Bourbon Fourteener
Master P Tries To Make Peace With Son Romeo After Social Media Feud: ‘My Door Is Always Open’
Paul Simon’s Wife: All About His 30 Year Marriage, Relationship With Carrie Fisher & More
Rachel Bilson & Hayden Christensen Arrive With Daughter Briar, 8, In Canada For Christmas