On yesterday’s Crunch, we talked about China’s crackdown on Chinese billionaire Jack Ma and his company Alibaba. After concluding Alibaba was behaving like a monopoly and engaging in anti-competitive behavior, Chinese regulators slapped Alibaba with a $2.8 billion fine. As if the record penalty wasn’t already rough for Jack Ma, on Monday, another one of Jack Ma’s companies was hit by Chinese regulators.
China has extended its crackdown on Jack Ma’s tech empire, imposing a restructuring plan that would turn Ant Group into a financial holding company. A financial holding company is a type of bank holding company that provides a variety of financial services other than banking, like investment advisory services.
Ant Group is an affiliate of Alibaba, and it is China’s largest digital payment platform. The crackdown on Ant Group comes after the company’s IPO was cancelled by regulators last year. The IPO was scheduled to be the largest offering in history — it was expected to raise an estimated $37 billion. However, the IPO was cancelled just two days before the offering after Chinese regulators began investigating Alibaba for “alleged anti-competitive behaviors on its e-commerce platform.”
China’s overhaul of Ant Group is expected to diminish its profitability and valuation by subjecting the company to stricter regulatory scrutiny and capital requirements. The overhaul will also force the company to break ties with its payment’s app Alipay and its other companies, which had been seen as an unfair advantage thanks to Alipay’s massive amount of consumer data.
Ant Group’s restructuring is a double whammy for Jack Ma as Chinese regulators crackdown on China’s tech titans.
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.