E-commerce billionaire Jack Ma will relinquish control of the fintech giant Ant Group. Ma’s retreat comes after the Communist Party of China’s unprecedented crackdown on tech companies in the country that began in late 2020, especially on two influential companies founded by Ma – the e-commerce behemoth Alibaba, and the Ant Group.
In 2020, Chinese officials had forced Ant Group to shelve its blockbuster initial public offering (IPO) just 48 hours before the listing was scheduled to happen, marking a watershed moment between Ma and the Chinese government, which has sought to exert greater state control over the economy in recent years. The $37 billion IPO would have been the world’s biggest had it gone through. Later, Alibaba was also fined a hefty $2.8 billion for allegedly abusing its dominance.
These incidents happened after 2019, when Ma, an English teacher-turned-entrepreneur, criticised Chinese banking regulators for acting like “pawnshops”. Following this, he has largely disappeared from public view.
Here’s how the latest restructuring at Ant Group will make Ma’s role in the company almost irrelevant, and why China has been instigating a brutal crackdown on tech companies – slicing billions of dollars off their values and shrinking revenues and profits.
What changes at Ant Group?
In a statement Saturday, Ant Group said that Ma would no longer be the “control person” at the company which billed the “restructuring” as a way to make its governance more “transparent and diversified”. Ma previously possessed more than 50 per cent of voting rights at Ant but the changes will mean that his share falls to close to 6 per cent.
Ant operates China’s ubiquitous mobile payment app Alipay which has more than 1 billion users. It said Ma and nine of its other major shareholders had agreed to no longer act in concert when exercising voting rights. “As a result, there will no longer be a situation where a direct or indirect shareholder will have sole or joint control over Ant Group,” it said in its statement.
While the change could revive Ant’s IPO bid, Chinese laws could mean that the listing is delayed further. China’s domestic A-share market requires companies to wait three years after a change in control to list. In Shanghai, that waiting period is two years, and in Hong Kong, it is one year.
Why did China crackdown on the tech sector?
In late 2020, China launched a multi-pronged crackdown – through antitrust investigations and sweeping regulatory changes – on a broad range of industries, which left new-age startups and old conglomerates alike operating in a new, uncertain environment, and battering their shares.
For instance, it blamed local tech giants including Alibaba, Tencent Holdings and Meituan for mistreating users, released rules that forced these companies to open up their algorithms to each other, and penalised them for false advertising. Alibaba and Meituan were fined $2.75 billion and $527 million respectively last year, for abusing their dominant market positions. Tencent was also barred from entering exclusive music copyright agreements.
A slew of gaming companies also faced the wrath of this crackdown as China slashed the amount of time those under 18 can spend playing games online to an hour on Fridays, weekends and holidays, in response to growing concern over gaming addiction. The country also stopped issuing publishing licences for over half a year, which are crucial for monetisation. As a result, more than 1,000 gaming companies ran out of business.
Last June, China’s cybersecurity regulator announced a probe into Didi Chuxing after it debuted on the New York Stock Exchange. It barred it from signing up new users and ordered app stores to remove 25 of its mobile apps.
