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Ant Considers Holding Company With Regulation Similar to Bank, Sources Say

Jack Ma’s company mulls how to appease Chinese Regulators.
(THINK A)
(THINK A)
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“Jack Ma’s besieged Ant Group Co. is planning to fold its financial operations into a holding company that could be regulated more like a bank, according to people familiar with the situation, potentially crippling the growth of its most-profitable units,” Bloomberg writes.

Why It Matters: Ant Group, a massive Chinese success story, was on the verge of cementing its place with a record-breaking IPO, valuing the company around $300 billion. But Chinese regulators stepped in, showing concerns about its financial services arm while suspending the IPO. Now, Ant is faced with overhauling its business to survive, which could significantly alter the trajectory of what was a game-changing company only a few weeks ago.

Quick Hits:

  1. Ant is planning to move any unit requiring a financial license into its new holding company, with regulators blessing. (Plans are still subject to change.)
  2. Ant is looking to fold “wealth management services, consumer lending, insurance, payments and MYbank, an online lender in which Ant is the largest shareholder,” into the holding company.
  3. Ant held $11 billion in cash and equivalents as of June and would use “subsidiary Zhejiang Finance Credit Network Technology Co. to apply for the financial holding license.”

The Final Word: “Under the financial holding company structure, Ant’s businesses would likely be subject to more capital restrictions, potentially curbing its ability to lend more and expand at the pace of the last few years.”

Justin Oh:

It looks like we should forget about any IPO of Ant Group for a long time. The biggest question I have is what the Chinese Communist Party (CCP) will do with Alibaba ($BABA). For now we haven’t pulled the trigger in “buying the dip”.

From a Wall Street Journal article this morning: “Beijing is seeking to shrink Jack Ma’s technology and financial empire and potentially take a larger stake in his businesses, according to Chinese officials and government advisers familiar with the matter, as regulators zero in on the billionaire in a campaign to strengthen oversight of an increasingly influential tech sphere.”

From a Bloomberg article this week: “Investors remain divided over the extent to which Beijing will go after Alibaba and its compatriots as Beijing prepares to roll out the new anti-monopoly regulations. The country’s leaders have said little about how harshly they plan to clamp down or why they decided to act now.”

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