Shares of Ant’s Alibaba Group Holding Company rose more than 6% in New York trading. Investors are betting the fines put an end to the multi-year crackdown that torpedoed Ant’s planned IPO in 2020 and ensnared some of the country’s most powerful private companies in sectors from online education to gaming. It sets the stage for Ant to revive growth and eventually revive plans for an IPO.
“The market likes it because the audit is likely to be over, and the fine, while large in absolute terms, is very manageable for such a large company,” said Vey-Sern Ling, managing director of Union Bancaire Privee, referring to Ant. The tax is less than the 9.6 billion yuan profit Ant made in the December quarter.
The People’s Bank of China said fines were imposed on Ant Group and its subsidiaries in response to violations of laws and regulations in areas including consumer financial protection, payment and settlement business, and anti-money laundering obligations. Ant said it had completed the rectification required by China’s financial regulators, according to a company statement.
A meaningful easing of restrictions on Ant — one of the most high-profile victims of President Xi Jinping’s sweeping crackdown on the country’s tech giants — would send a strong signal that policymakers are following through on recent pledges to support the industry.
The Communist Party’s evolving stance toward the private sector has become one of the most closely watched developments in global markets in recent years, with some observers even describing China’s sprawling internet sector as uninvestable.
“The decision addresses market concerns about fintech and the broader internet sector,” Jefferies analysts including Thomas Chong said in a note. They said it “removes the burden” on Alibaba shares.
Most of the major problems in financial platform companies such as Ant Group and Tencent have been rectified, the central bank said in the statement.
Ant’s bottom line has eroded since the days when it was preparing for the world’s largest initial public offering in 2020, while its Alibaba subsidiary is in the process of splitting into six major businesses from cloud services to meal delivery and logistics. While investors initially welcomed the potential creation of value, Alibaba shares have fallen from their 2023 highs and have shed more than $600 billion of their value since the start of the Ant Ring.
Fines were also issued against PICC Property & Casualty Co. , Postal Savings Bank of China Co and Ping An Bank Co due to problems found in previous law enforcement inspections, according to the statement. It is unclear why Tencent also received a fine. WeChat operator executives have repeatedly emphasized since 2022 that their financial business fully complies with the law, and that they are in constant dialogue with Beijing.
In a statement, Tencent said it saw no negative impact from the fine, and that it expected China to focus on “normal regulation” going forward.
Ant co-founder Ma is back To China in early March after a long period of travel abroad. The government persuaded Ma to return to the mainland as a way of showing the authorities’ support for private entrepreneurs, Bloomberg News said mentioned.
The move follows Ma’s decision to relinquishing control from Ant in January, and holds about 6.2% of the voting rights after the change. Then, the head of the Communist Party of Hangzhou praised Ant for her commitment to the leadership of the party, and demanded that local government departments solve the problems raised by the fintech company.
Ant said in January it was not planning an initial public offering now and was focusing on its business. Still, company president Eric Jing He said In 2021 it will finally be released to the public.
Over two years ago, Chinese regulators abruptly halted Ant’s initial public offering, sending shock waves through global capital markets. New rules have been imposed on the fintech giant, which has operations ranging from consumer lending and wealth management to online payments.
Central bank ordered Ant b folds All financial units in a holding company. It also required the company to open its payments app to competitors and cut improper linking of payments with other products, including lending services.
However, Martin Chorzimba, a fellow at the Peterson Institute for International Economics, said China’s recent actions do not mark a return to deregulated growth.
“Instead it is the permanent installation of a much higher regulatory barrier for the sector,” he said. “It is clear that the authorities have struggled to define exactly what they want the fintech space to look like and the role of big tech companies in it.”
For Ant, it may take longer than expected for an IPO to resume. Companies cannot be listed locally on the so-called A-share market in the country if they have changes under control in the past three years — or in the past two if listing on Shanghai’s STAR Market, which is trending towards new technology companies. For the Hong Kong Stock Exchange, this waiting period is one year.
Ant rating will also look different if it goes public again. While Ant fetched a rating of $280 billion Prior to the IPO, the many regulations imposed over the last two years or more which means it’s now worth a fraction of that, because now it’s more “fin” than “technology”.
Ant can also spin some businesses such as blockchain technology, its own database operation known as OceanBase and global services, familiar people have He said. These deliberations are preliminary and may be subject to change.