Following news that Ant founder Jack Ma will relinquish control of the fintech behemoth following an overhaul, shares of registered Chinese companies with Ant Group as a significant stakeholder increased on Monday.
Alibaba’s (9988.HK) Hong Kong-listed shares increased 7%.
Along with Jilin Zhengyuan (003029.SZ), Longshine Technology Group Co Ltd (300682.SZ), Shanghai Golden Bridge Infotech Co (603918.SS), Hundsun Technologies (600570.SS), and Orbbec Inc (688322.SS), all of these companies saw an increase in share prices. Ant indirectly has holdings in those businesses ranging from little more than 5% to more than 20%.
Jack Ma, the company’s founder and head, will relinquish the hold on it, Ant made an announcement over the weekend.
The reform aims to put an end to the regulatory blitz that began as soon as its massive stock market launch was derailed two years ago.
Jack Ma’s decision to relinquish control of Ant and other companies, according to Redmond Wong, a capable Greater China market strategist at the renowned Saxo Markets, Hong Kong, will help minimize some uncertainty and look into the door for the group’s work field to grow and develop.
Given that the modification was probably the result of negotiations with the authorities, it ought to have allayed some of their worries about the group, based on the statement by 5Wong.
And the insight of investors toward the Chinese internet sector is probably going to go forward still.
The rectification of the financial operations of 14 platform companies has “basically been completed,” according to Guo Shuqing, lead of China’s Banking and Insurance Regulatory Commission (CBIRC), in an interview with the country’s official Xinhua news agency that was published on January 7.
However, there are still a few issues that need to be resolved. Guo did not mention the brands.
Guo was quoted as adding that following that, authorities will embrace “normalised regulation” and encourage platform businesses to operate legally.
When Ant’s $37 billion IPO, which was expected to be the biggest in history, was abruptly postponed in November 2020, the financial technology company was forced to restructure, and rumours circulated that the Chinese billionaire would have to relinquish control.
After Ant’s announcement, Alexander Sirakov, a managing partner at Shanghai-based financial consultancy Aquariusx, said that investors may finally stop speculating and give a risk premium to the new firm that Ant was changed into.
In a research note published on January 8, Morgan Stanley stated that it will upgrade Alibaba to its “top pick” share in the Chinese internet sector by 2023, citing loosening regulations as one of the factors in its decision.
The adjustments made on Saturday, though, are likely to cause a further delay because of listing restrictions, even though some analysts have suggested that a transfer of ownership could allow Ant to resuscitate its initial public offering (IPO).
Companies must wait three years to list on China’s domestic A-share exchange following a change in control. The delay is two years on Shanghai’s STAR market, which is modelled after the Nasdaq, and one year in Hong Kong.
On Sunday, Ant stated that it has no plans to launch an IPO.
In the most recent round of its restructuring, the CBIRC approved an increase in capital for Ant’s consumer financing division from 8 billion yuan to 18.5 billion yuan ($2.68 billion).
A story from November that cited sources said Chinese regulators are prepared to punish Ant Group more than $1 billion, which may put an end to the fintech firm’s two regulatory makeovers.
However, according to Li Nan, a professor of finance at the Shanghai Jiaotong University, Ant’s fundamental issues persist despite the shift in leadership.
Li stated that the main issue with Ant’s business model is the incorporation of insurance, Huabei, and Jiebei financial advisory, as well as loans, into the Alipay payment platform while avoiding the requirements of necessary risk assessment regulations, such as capital adequacy ratios, liquidity ratios, and loan loss reserve ratios.
Even after Ant’s capital boost, she said that the leverage was still far too high.