|From: Glenn Petersen||4/12/2021 8:14:25 AM|
|Jack Ma’s Ant Group to become financial holding company under a Beijing-enforced revamp|
PUBLISHED MON, APR 12 20217:41 AM EDT
UPDATED MON, APR 12 20217:52 AM EDT
-- Jack Ma’s Ant Group will restructure as a financial holding company, China’s central bank said on Monday.
--The fintech giant’s $37 billion IPO was derailed by risk-wary regulators days before it was due to list in November.
-- The overhaul comes two days after e-commerce giant Alibaba, of which Ant is an affiliate, was hit with a $2.75 billion antitrust penalty as China tightens controls on the “platform economy.”
China’s Ant Group, the fintech giant whose $37 billion initial public offering was derailed by risk-wary regulators days before it was due to list in November, will restructure as a financial holding company, the country’s central bank said on Monday.
The overhaul comes two days after e-commerce giant Alibaba, of which Ant is an affiliate, was hit with a $2.75 billion antitrust penalty as China tightens controls on the “platform economy.”
Under terms of the settlement, Ant will restructure as a financial holding company, a move that, along with other restrictions announced on Monday, is expected to curb its profitability and valuation.
“Ant Group attaches great importance to the seriousness of the rectification,” the company said in a statement, adding it planned to set up a personal credit reporting business and to fold its two flagship lending businesses into its consumer finance company.
The People’s Bank of China said that under a “comprehensive and feasible restructuring plan,” Ant would cut the “improper” linkage between payments service AliPay, virtual credit card business Jiebei and consumer loan unit Huabei.
The central bank also asked Ant to break its “monopoly on information and strictly comply with the requirements of credit information business regulation.”
The company, part of the sprawling business empire founded by billionaire Jack Ma, agreed to improve corporate governance and “rectify illegal financial activities in credit, insurance and wealth management,” the central bank said.
The central bank said it had also asked Ant to control its leverage and product risks, and control the liquidity risk of its flagship fund products and to “actively lower” the size of its massive Yu’eBao money market fund.
The measures “set an example” for financial regulation of the platform economy,” the state-backed Economic Daily newspaper said in a Monday commentary.
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|To: Glenn Petersen who wrote (763)||4/12/2021 9:29:26 AM|
|From: The Ox|
|Forward PE under 20 makes this look extremely attractive. Especially in light of the expectations for over 30% growth in revenues the next couple of years.|
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|From: Sr K||4/12/2021 1:20:00 PM|
Jack Ma’s Ant Group Bows to Beijing With Company Overhaul
China’s central bank said Ant will apply to become a financial holding company, subjecting it to regulations similar to those governing banks
What Happened to China's Superstar Entrepreneur Jack Ma
After Jack Ma criticized Chinese regulators, Beijing scuttled the initial public offering of his fintech giant Ant and he largely disappeared from public view. WSJ looks at recent videos of the billionaire to show how he got himself into trouble.
Updated April 12, 2021 8:23 am ET
Ant Group Co., the financial-technology giant controlled by billionaire Jack Ma, will apply to become a financial holding company overseen by China’s central bank, overhauling its business to adapt to a new era of tighter regulation for internet companies.
In a statement, the People’s Bank of China said Ant representatives were summoned to a meeting Monday with four regulatory agencies that also included the country’s banking, securities and foreign-exchange overseers. It said a “comprehensive, viable rectification plan” for Ant has been formulated under the regulators’ supervision over the past few months.
The directive follows an intense regulatory assault on Mr. Ma’s business empire that began with the suspension of the company’s blockbuster initial public offering in November. Ant had been on track to sell more than $34 billion worth of stock and list on stock exchanges in Hong Kong and Shanghai, when Beijing pulled the plug on the dealafter Mr. Ma criticized financial regulators in a public speech.
In January, The Wall Street Journal reported that Ant was planning to fall fully in line with China’s financial regulations by turning itself into a financial holding company, essentially subjecting Ant to regulations similar to those governing banks.
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|From: Glenn Petersen||4/17/2021 2:59:29 PM|
|EXCLUSIVE China’s Ant explores ways for Jack Ma to exit|
5 minutes read
April 17, 2021
Ant explores ways for Jack Ma to exit -sources
Ant Group is exploring options for founder Jack Ma to divest his stake in the financial technology giant and give up control, as meetings with Chinese regulators signaled to the company that the move could help draw a line under Beijing’s scrutiny of its business, according to a source familiar with regulators’ thinking and two people with close ties to the company.
Reuters is for the first time reporting details of the latest round of meetings and the discussions about the future of Ma’s control of Ant, exercised through a complicated structure of investment vehicles. The Wall Street Journal previously reported that Ma had offered in a November meeting with regulators to hand over parts of Ant to the Chinese government.
Officials from the central bank, People’s Bank of China (PBOC), and financial regulator China Banking and Insurance Regulatory Commission (CBIRC) held talks between January and March with Ma and Ant separately, where the possibility of the tycoon’s exit from the company was discussed, according to accounts provided by the source familiar with the regulators’ thinking and one of the sources with close ties to the company.
Ant denied that a divestment of Ma's stake was ever under consideration. "Divestment of Mr. Ma's stake in Ant Group has never been the subject of discussions with anyone," an Ant spokesman said in a statement.
Reuters could not determine whether Ant and Ma would proceed with a divestment option, and if so, which one. The company hoped Ma's stake, which is worth billions of dollars, could be sold to existing investors in Ant or its e-commerce affiliate Alibaba Group Holding Ltd without involving any external entity, one of the sources with company ties said.
But the second source also with company connections said that during discussions with regulators, Ma was told that he would not be allowed to sell his stake to any entity or individual close to him, and would instead have to exit completely. Another option would be to transfer his stake to a Chinese investor affiliated with the state, the source said.
Any move would need Beijing's approval, both sources with knowledge of the company's thinking said.
The accounts provided by all the three sources are consistent in terms of the timeline for how discussions have evolved over the past few months. On the company side, one source said Ma met regulators more than once before the Chinese New Year, which was in early February. And the second source said Ant started working on options for Ma's possible exit about a couple of months ago. The source familiar with the regulators' thinking said Ant had told officials during a meeting sometime before mid-March that it was working on options.
The source familiar with the regulators' thinking has direct knowledge of conversations between Ant and officials, while one of the sources with company ties has been briefed on Ma's interactions with regulators and Ant's plans. The other one has direct knowledge of Ant's discussions about options. They requested anonymity because of the sensitivity of the situation.
The Ant spokesman did not provide any comments from Ma. Alibaba referred questions to Ant. Jack Ma's office did not respond to Reuters' request for comment made via Ant. The State Council Information Office, PBOC, and CBIRC, also did not respond to requests for comment.
The high-stakes discussions come amid a revamp of Ant and a broader regulatory clampdown on China's technology sector that was set in motion after Ma's public criticism of regulators in a speech in October last year.
Ma's exit could help clear the way for Ant to revive plans to go public, which stalled after the tycoon's speech, both sources proximate to the company said. Ant, which was about to raise an estimated $37 billion in what would have been the world's largest initial public offering, aborted plans the day after Ma's Nov. 2 meeting with regulators.
'TOO BIG FOR THEIR BRITCHES'
Since then Beijing has unleashed a series of investigations and new regulations that have not only reined in Ma's empire but also swept across the country's technology sector, including other high-profile, billionaire entrepreneurs.
For Ma, 56, who also founded Alibaba and once commanded cult-like reverence in China, the consequences have been particularly severe. The tycoon completely withdrew from the public eye for about three months and has continued to keep a low profile after a brief January appearance.
China’s antitrust regulator fined Alibaba a record $2.75 billion on April 10 following an antimonopoly probe that found it had abused its dominant market position for several years. A couple of days later Ant was asked by the central bank to become a financial holding company, bringing it under the ambit of banking rules that it had managed to avoid so far and allowed it to grow rapidly.
"China still likes to promote its technology firms as global leaders just as long as they don't get too big for their britches," said Andrew Collier, managing director of Orient Capital Research.
Although Ma had previously stepped down from corporate positions, he retains effective control over Ant and significant influence over Alibaba.
While he only owns a 10% stake in Ant, Ma exercises control over the company through related entities, according to Ant's IPO prospectus.
Hangzhou Yunbo, an investment vehicle for Ma, has control over two other entities that own a combined 50.5% stake of Ant, the prospectus shows. Yunbo can decide all matters related to Ant and exercise the combined voting power of the three entities, the prospectus shows.
Ma holds a 34% equity interest in Yunbo, the prospectus shows.
One of the sources with company ties said there's "a big chance" Ma would sell his equity interest in Yunbo to exit from Ant, ultimately paving the way for the fintech major to move closer to completing its revamp and reviving its listing.
Reuters could not reach Yunbo for comment. Ant did not
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|From: Glenn Petersen||5/14/2021 4:11:39 AM|
|Alibaba Posts First Loss Since Going Public After Antitrust Fine|
Chinese e-commerce company says it will invest future profits into warding off competition
By Stephanie Yang and Jing Yang
Wall Street Journal
Updated May 13, 2021 10:05 pm ET
Alibaba Group Holding Ltd. BABA -6.28% posted its first-ever quarterly loss since it went public after being hit by a record antitrust fine in China and pledged to invest future profits into improving its business and warding off competition.
Over the past year, the Chinese e-commerce company has been under pressure from both encroaching competitors and an antitrust investigation, which ruled that Alibaba had abused its dominant market position. In a Thursday earnings call, Chief Executive Daniel Zhang said the company would focus on bettering its platform following the fine.
“We have gone through all kinds of challenges including the Covid-19 pandemic, fierce competition as well as the antimonopoly investigation and the penalty decision by Chinese regulators,” Mr. Zhang said. “We believe the best way to overcome these challenges is to look forward and invest for the long term.”
Mr. Zhang said any profits this fiscal year that surpassed last year’s figure would go toward areas including improving user growth and engagement, merchant support, infrastructure and logistics.
For the quarter ended in March, Alibaba’s net loss attributable to ordinary shareholders was 5.5 billion yuan, equivalent to $836 million, compared with a net income of 3.2 billion yuan in the same period a year earlier. Its sales rose 64% to 187.4 billion yuan, equivalent to about $28.6 billion, beating analyst expectations.
In April, China’s State Administration for Market Regulation levied a $2.8 billion fine against Alibaba, equal to 4% of the company’s domestic annual sales. The regulator said its investigation, launched in December, found that the company punished certain merchants who sold goods both on Alibaba and on rival platforms, a practice known as “er xuan yi”—literally, “choose one out of two.”
“We believe the self-reflection and adjustment we’ve made will help us to better serve our community of consumers, merchants and partners, and position us well in the future,” Mr. Zhang said.
Alibaba also has taken steps to court merchants, cutting fees and making it easier for them to open stores on its e-commerce platforms. Mr. Zhang said on Thursday that the company was working on additional measures to help vendors on its platform.
The announcement of Alibaba’s penalty marked the end of a period of uncertainty for the company and its investors, though Beijing officials have continued to take a hard-line stance against China’s technology giants and any potential regulatory infractions. Alibaba could also be forced to sell off its media assets, The Wall Street Journal previously reported.
In the current fiscal year, Alibaba, which went public on the New York Stock Exchange in 2014, expects its revenue to grow at least around 30% to more than 930 billion yuan, compared with the previous year’s growth of 41%.
Alibaba has striven to maintain market share in its core e-commerce business as new upstarts such as five-year-old Pinduoduo and popular short-video platforms have grown their own user bases. On Thursday, the company reported that annual active consumers at the end of March surpassed one billion, with 891 million of those in China.
Pinduoduo, which successfully drew in buyers through gamification and cheap deals, said earlier this year that it had edged past Alibaba in annual active consumers with 788 million at the end of 2020.
Alibaba has its own competing app Taobao Deals, offering lower-priced goods. On Thursday, the company said 70% of new active users came from less developed areas, signaling inroads in lower-tier cities and rural regions.
For Ant Group Co., Alibaba’s beleaguered financial-technology affiliate, profit grew about 41% for the quarter ended Dec. 31 from a year earlier despite regulatory scrutiny. Ant generated an estimated quarterly profit of 21.8 billion yuan, equivalent to $3.4 billion, based on the Journal’s calculations from Alibaba’s disclosures.
During the period, the Chinese government called off Ant’s blockbuster initial public offering that had been on track to be the world’s largest stock sale and subsequently ordered Ant to revamp its businesses.
Ant, which owns the popular payment and lifestyle app Alipay, has in recent months been coming to grips with a bevy of new regulations, including turning itself into a financial-holding company overseen by the central bank. The designation would subject Ant to rules similar to those governing banks and cloud the company’s growth prospects.
Alibaba owns a third of Ant and reports its share of profits from the online-payments company with a one-quarter lag. Company executives made no comment on Ant on Thursday’s call, the first after China’s central bank issued directives last month on how it wanted Ant to rectify its businesses.
Since Ant and Alibaba fell into Beijing’s regulatory crosshairs, the outspoken co-founder Jack Ma largely disappeared from public view, aside from a handful of video appearances. He resurfaced earlier this week at Alibaba’s Hangzhou headquarters to attend an annual corporate celebration known as AliDay.
—Matt Grossman contributed to this article.
Write to Stephanie Yang at firstname.lastname@example.org and Jing Yang at Jing.Yang@wsj.com
Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
Appeared in the May 14, 2021, print edition as 'Alibaba Posts Loss After Fine.'
Alibaba Posts First Loss Since Going Public After Antitrust Fine - WSJ
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|To: Glenn Petersen who wrote (767)||7/7/2021 11:27:25 AM|
|From: Glenn Petersen|
|Down $831 Billion, China Tech Firm Selloff May Be Far From Over |
By Jeanny Yu and Abhishek Vishnoi
July 6, 2021, 9:57 PM CDT
Updated on July 7, 2021, 3:43 AM CDT
-- Selling in technology sector seen continuing this quarter
-- Hang Seng Tech Index has lost 31% from February high
China’s technology giants have seen a combined $823 billion wiped from their market value since a February peak, with Beijing’s expanding crackdown on the sector fueling investor concern that the selloff is far from over.
Authorities on Tuesday issued a sweeping warning to the nation’s biggest companies, vowing to tighten oversight of data security and overseas listings just days after Didi Global Inc.’s contentious decision to go public in the U.S. That has put further selling pressure on China’s biggest technology names including Tencent Holdings Ltd., Alibaba Group Holding Ltd., JD.Com Inc., Baidu Inc. and Meituan.
“The selling will continue in the third quarter,” said Paul Pong, managing director at Pegasus Fund Managers Ltd. He says he sold two thirds of his technology stock holdings, including in Tencent and Alibaba, in May. “The measures from authorities will keep coming.”
The losses have come from 10 firms including three U.S. listed names. Didi’s ADRs fell 20% stateside on Tuesday, erasing about $15 billion of its market value.
The Hang Seng Tech Index, whose members include many of China’s biggest tech companies, fell as much as 1.9% before paring losses to 0.6% Wednesday, marking its sixth consecutive day of declines. Tencent slid 1.9%, among the biggest decliner on the Hang Seng Index. Alibaba dropped 1.7%, while Meituan fell 1.3%.
China’s sweeping warning Tuesday followed the opening of a security review by the nation’s internet regulator last week into Didi and a demand for app stores to remove it. The move stunned investors and industry executives and has hammered the Hong Kong shares of peers such as Tencent -- one of Didi’s largest backers.
Investors worry that the latest security-based probes have opened a new front in President Xi Jinping’s broader campaign against China’s internet giants that began in November with the collapse of Ant Group Co.’s mega IPO and subsequent antitrust investigations into Alibaba and Meituan. Over the weekend, China moved against two other companies that also recently listed in New York -- Full Truck Alliance Co. and Kanzhun Ltd.
Investors are likely to take “a sell first, talk later approach” to limit policy risks in their portfolio, said Justin Tang, the head of Asian research at United First Partners in Singapore. Stock prices are likely to be driven by near-term sentiment swings as opposed to company fundamentals, Jian Shi Cortesi, a Zurich-based fund manager at GAM Investment Management, wrote in an email.
To be sure, valuations may start to look attractive. Tencent, Alibaba and Baidu Inc. -- among the earliest Chinese tech companies to enter public markets and the biggest, trade at an average of 22 times forecasted earnings over the next 12 months. That compares with the 10-year average of 26 times, according to data compiled by Bloomberg.
“In case the market sentiment goes into extreme pessimism and we see the Hang Seng Tech Index down 20% from here, it could be a rare opportunity to buy some fast-growing Chinese internet companies at extremely attractive prices,” GAM’s Jian Shi said.
The Hang Seng Tech Index is down 31% from its February high. Investors in mainland China, who accounted for about a third of turnover in Tencent shares this year, turned net sellers of the stock in June.
“While the long-term future of Chinese tech remains, it will be caveat emptor for investors in the near term,” said United First’s Tang.
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|From: Glenn Petersen||7/30/2021 9:26:51 AM|
|Not specific to BABA:|
China’s Tech Crackdown Could Backfire Badly
When a government comes to believe it can snap its fingers and create—or destroy—whole industries at will, things can easily go awry
By Nathaniel Taplin
Wall Street Journal
Updated July 30, 2021 2:44 am ET
In the superhero movie “Avengers: Infinity War,” antagonist Thanos snaps his fingers and half of life in the universe instantly disappears. After the rout of the past few days, that may sound horribly familiar to investors in certain Chinese educational and internet technology stocks.
The big question is what comes next.
The regulatory fusillade against China’s internet technology firms has been intensifying for months and clearly has several drivers: among them a good-faith effort to curb anticompetitive practices that hurt small businesses and IT upstarts, elite displeasure with the financial and media clout of companies like Ant and Alibaba, and Beijing’s worries about data security.
But perhaps the most compelling explanation, articulated on multiple occasions by the government itself, is simply that Beijing would strongly prefer more investment to flow into what it regards as real technology like microchips, batteries, robotics and advanced materials, rather than continuing to endure what it calls a “disorderly expansion of capital” in areas such as internet software platforms.
Certainly this is the conclusion of the stock market itself. Since last Friday, Alibaba and Tencent have lost 9% and 11%, respectively, in Hong Kong, while state-backed Semiconductor Manufacturing International Corp., or SMIC, and Hua Hong Semiconductor are up 25% and 22%, respectively.
All of this sounds great in theory. The problem is, it may not work, especially since state-backed incumbents like SMIC are so entrenched in many of these priority sectors at home, and in many cases deep-pocketed foreign competitors have a strong technological lead abroad. If it doesn’t succeed, Beijing could find that it has seriously damaged one of its most vibrant industries—and a large source of jobs—in exchange for a bevy of mediocre, slower-growing chip and robotics companies.
Consider, for example, the return on invested capital for China’s largest internet companies, compared with those in areas such as microchips and batteries that Beijing has been pushing for years with mixed success. In the fiscal years 2016-2020, Alibaba and Tencent averaged an ROIC of 18.9% and 19.5% respectively according to FactSet. SMIC and Hua Hong averaged 3.6% and 7.4%. Battery champion Contemporary Amperex Technology, or CATL, averaged a more respectable 15.5%, but that has shrunk to around 10% following big subsidy cuts and changes allowing real foreign competition in 2019.
Now imagine that for the next decade China produces lots of Hua Hongs and CATLs but no more Alibabas or Bytedances. The impact on growth, employment and debt could be significant.
Of course, there is no reason capital-intensive manufacturers can’t produce outsize returns once they reach the technological frontier and gain real market power. Just look at Intel or Huawei, which made respectable returns for many years. And some Chinese companies in priority sectors are doing fine. Venerable Chinese robotics firm Shenzhen Inovance, for instance, had an ROIC of 20% last year. On the other hand, Huawei succeeded partly because it was free to build upon American technology and had easy access to global export markets. Inovance has been around since 2003. Future would-be Huaweis or Chinese Intels will find themselves facing a very different global landscape.
The impact on employment could also be significant. With the exception of last year, when China’s factories were boosted by being the only game in town, all of China’s net employment gains since 2012 have been in services. In part that reflects a good thing—rising productivity in manufacturing, meaning fewer workers needed per unit of output. But forcibly trying to redirect more investment into capital-intensive manufacturing won’t do much to help new graduates already struggling to find work, especially if those efforts produce mediocre, slow-growing companies rather than technological champions.
Beijing is right to see anticompetitive practices in its internet tech sector as a major problem. But when a government comes to believe it can snap its fingers and create—or destroy—whole industries at will, things can easily go awry. And the “disorderly” expansion of private capital has produced immense wealth for the country and its people. There is a Chinese saying, favored by official spokespeople, that comes to mind: picking up a stone to smash one’s foot. In English there is another: shooting oneself in the foot.
Write to Nathaniel Taplin at email@example.com
China’s Tech Crackdown Could Backfire Badly - WSJ
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