Jack Ma-backed Ant to buy back shares at 70% lower valuation than at IPO

By Lulu Yilun Chen

Jack Ma-backed Ant Group Co. is proposing to buy back as much as 7.6% of shares in an effort to retain talent and offer an exit for investors ensnared by a years-long regulatory crackdown at the company. 
 

Ant’s planned repurchase of the equity would value the company at about 567.1 billion yuan ($78.5 billion), it said in a statement on Saturday. The valuation is almost 70% lower than the $280 billion market capitalization the finance technology firm fetched for its scrapped initial public offering in late 2020.

The repurchased stock will be transferred into the company’s staff incentive plan to attract talent, Ant said.

Chinese regulators signaled that the years-long crackdown on the country’s tech sector is coming to an end after it slapped more than $1 billion of fines on Ant and Tencent Holdings Ltd. on Friday. Ant has completed its overhaul ordered by Beijing, shaking up its sprawling fintech operations which have eroded profitability. 

The individual limited partners of two entities that form the majority of Ant’s shareholders — mostly comprised of Ant executives — have voluntarily decided not sell shares back to the company out of the commitment to Ant in the long-term, the company said. 

The limited partners also committed to retaining the two dividends in 2022 with Hangzhou Junhan and Hangzhou Junao to enhance the operation’s capital strength.

With the regulatory clampdowns out of the way Ant can refocus on business growth and even pave way for reviving its IPO. 

Financial regulators fined Ant 7.12 billion yuan, wrapping up more than two years of probes into the company. Tencent was levied a 2.99 billion yuan fine, according to statements from the central bank Friday.

Tencent and Ant affiliate Alibaba Group Holding Ltd. soared in New York trading. A meaningful relaxation of curbs on Ant — one of the most high-profile casualties of President Xi Jinping’s sweeping clampdown on the country’s tech giants — would send a strong signal that policymakers are following through on recent pledges to support the industry.

Ant is developing large-language model technology that will power ChatGPT-style services, joining a list of Chinese companies seeking to win an edge in next generation artificial intelligence. The company has invested nearly 20.5 billion yuan in research and development last year, doubling its annual spending on such efforts compared with 2019.