Quoting anonymous sources familiar with the matter, the
report said the plan requires Ant to place all of its businesses into the
holding company, including its technology offerings in areas like blockchain
and food-delivery. An official announcement may come before the start of
China’s Lunar New Year holiday on February 11.
In a call with analysts just a day earlier, Alibaba’s CEO
Daniel Zhang had warned of “substantial uncertainties” over Ant Group’s
business prospects and initial public offering plans.
“Due to recent significant changes in the fintech regulatory
environment in China, Ant Group is in the process of developing its
rectification plan, which will need to go through the relevant regulatory
procedures,” he said.
China’s regulators abruptly halted Ant’s record $35 billion
IPO and subsequently announced investigations into its sprawling business in
November. Authorities were said to be scrutinizing the associated risks of
Ant’s operations, such as increasing leverage ratios in China’s financial
systems.
Meanwhile, Alibaba has also recently been placed under heavy
regulatory scrutiny. The Hangzhou-based company has been the subject of an
anti-monopoly probe that started in December. It’s said to be under
investigation for alleged monopolistic business practices like “er xuan yi,”
which means choose one of two. It’s a policy that forces merchants to sell
exclusively on just one platform.
On Tuesday, Alibaba said that it had established a special
task force to conduct internal reviews, and will cooperate with the State
Administration for Market Regulation (SAMR) in its ongoing investigation. The
company offered few details on the length or possible outcome of the
investigation.
Alibaba had just reported another quarter of strong
earnings. Sales for the three months ended in December jumped another 37% to
221.08 billion yuan ($34.24 billion). Net profit came in at 79.4 billion yuan
for the same period, which included the company’s annual Singles’ Day shopping
bonanza.
Alibaba’s shares fell almost 4% in Hong Kong on Wednesday
amid concerns about the company’s ongoing regulatory challenges.
Alibaba’s billionaire cofounder Jack Ma, a former English
teacher who has long been the face of entrepreneurship and innovation in China,
was conspicuously left out of a list of China’s entrepreneurial leaders
compiled by state media this week. The omission was a public show of how far he
has fallen out of favor with the country’s leaders. Ma had only just made his
first public appearance in January after disappearing from public view for
nearly three months.
Brock Silvers, a Hong Kong-based chief investment officer of
Kaiyuan Capital, says the regulatory risk is “more real for Ant.”
“New capital requirements will completely change Ant’s
business model, and any new IPO would be saddled with significantly lower
pricing,” he said in an email.
But Shawn Yang, a Shenzhen-based managing director of
research firm Blue Lotus Capital Advisors, points out that Alibaba’s
anti-monopoly probe comes at a time when the company is already grappling with
increasing competition.
Besides direct challenges from e-commerce platforms JD.com
and Pinduoduo, Alibaba also has to increasingly compete with short video sites
for the attention of shoppers. For example, Bytedance, the parent company of
short video app TikTok, is experimenting with adding more e-commerce and
payment features to TikTok’s Chinese version, Douyin, which has more than 600
million daily active users in the country.
“Alibaba remains the top choice for merchants but it does
have to face the rise of newer platforms,” says Yang, “ The anti-monopoly
investigation may expedite this trend, and the company may have to charge
merchants less to ensure they will stay.”
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