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Jack Ma Surrenders On Ant Financial. Smart Move.

Ceding control of the fintech will spare the multibillionaire harsh scrutiny from Chinese officials

WATCH: Jack Ma is planning to relinquish control of Ant Group, according to the Dow Jones. Bloomberg Opinion columnist Shuli Ren discusses the issue.Source: Bloomberg
WATCH: Jack Ma is planning to relinquish control of Ant Group, according to the Dow Jones. Bloomberg Opinion columnist Shuli Ren discusses the issue.Source: Bloomberg

Jack Ma may be blunt — his harsh criticism of China’s state-dominated banking system cost him a $34 billion blockbuster initial public offering in 2020. But he is not stupid.

The billionaire plans to cede control of Ant Group Co., a fintech affiliate of his e-commerce giant Alibaba Group Holding Ltd, the Wall Street Journal reported. He currently controls 50.52% of Ant, which would have been valued at more than $300 billion had it gone public. 

Bankers hoping for a revival of Ant’s listing will be disappointed. A change in control means the fintech will have to wait a while before attempting to list again. China’s securities watchdog requires a timeout for companies that go through such big ownership changes.

Ma had previously held back from giving up control because he didn’t want to delay Ant’s plan for an IPO, according to the Journal. So it’s interesting to contemplate why he is changing his mind.

First of all, how much is Ant worth now? With its most profitable businesses gone — such as arranging consumer loans without putting in any capital itself —  the unicorn has become a shadow of its past self. A year ago, Fidelity Investments cut the value of its Ant stake, reducing the company’s valuation to only $78 billion.

That might even be a generous estimate. If Ant was to go public on Shanghai’s main board as a financial holding company, it would be valued as a bank. In that case, Ant could be worth as little as $29 billion, according to Bloomberg Intelligence.

Granted, Ma’s Ant stake still amounts to a lot of money. But it’s simply not worth all the scrutiny for a tycoon who’s already got billions — $37 billion according to the latest figure from Bloomberg Billionaire Index. Try as he might, Ma simply can’t move beyond his past.

President Xi Jinping’s mantra of “common prosperity” — replete with warnings against “excessively high income” — has sparked sharp questions about privilege and access. One reason Xi quashed Ant’s IPO, according to the Journal, was the government’s growing unease over the company’s complex ownership — and the people who stood to gain the most from the blockbuster listing.

Ma has given away those prized Ant shares as tokens of friendship. For instance, through Yunfeng Capital, founded by Ma and Target Media’s David Yu, the billionaire had allowed his friends to invest in Ant early. One pal, nicknamed “a lot of money,” famously paid HK$42.2 million ($5.4 million) for Ma’s debut painting, a collaboration with a well-known Chinese artist. “A lot of money” would have been many times richer had Ant’s IPO gone ahead.

Even scarier for a Chinese billionaire these days is the involvement of the anti-graft watchdog. Earlier this year, the feared Central Commission for Discipline Inspection was seeking to understand the influence of Ma’s fintech empire and the extent of its transactions with state banks and enterprises, Bloomberg News reported. Inevitably, Ant has a lot of business dealings with state-linked companies. It has arranged consumer loans for SOE banks, and may also count SOE asset managers as buyers of its sizable asset-backed securities.

These days, anyone who handles state money needs to be extra careful, because punishments are severe. Lai Xiaomin, former head of China Huarong Asset Management Co., was executed for receiving 1.8 billion yuan ($280 million) in bribes. Hu Huaibang, former boss at China Development Bank, is serving a life sentence for bribery. 

Meanwhile, with extended Covid-related lockdowns denting household balance sheets, Chinese consumers may no longer be stellar borrowers. Some are staging mortgage boycotts. So what if they start to default on their personal loans? Will Ant be held liable for bad debt on SOE banks’ books?

Seen in that light, who wants to be the public face of Ant now? Ma has left the building. He is much better off holidaying in his mega-yacht.

More From Bloomberg Opinion:

  • Jack Ma's Famous Friends Will Cost Him Billions More: Shuli Ren
  • Jack Ma’s Ant Is More MasterCard Than PayPal: Ren and Trivedi
  • Jack Ma Did What He Was Told, So Why the Scrutiny?: Shuli Ren

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Shuli Ren is a Bloomberg Opinion columnist covering Asian markets. A former investment banker, she was a markets reporter for Barron’s. She is a CFA charterholder.

More stories like this are available on bloomberg.com/opinion

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