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Alibaba’s Ant to exclude blockchain services, conduct IPO

alibabas-ant-to-exclude-blockchain-services-conduct-ipo
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Alibaba’s Ant to exclude blockchain services, conduct IPO

Ant Group, Alibaba’s fintech arm, is rumored to exclude blockchain development from its primary financial business in China to pave the way for a Hong Kong IPO.

Ant Group Co., a fintech affiliate of the Chinese e-commerce giant Alibaba, is contemplating a significant organizational overhaul. It would divest some non-essential functions from its core financial business in China, insiders told Bloomberg.

Ant Group is considering the separation of its blockchain, database management, and global operations from its principal entity as part of this strategy. According to the insiders, the spin-offs are part of a larger plan to secure a financial holding license in China. Ant Group has reportedly communicated this information to a select group of shareholders.

On the successful completion of the proposed restructuring and acquisition of the financial holding license, Ant Group will potentially revive its plans for a Hong Kong IPO. The company will go for one exchange listing instead of the previously proposed dual listing in Shanghai and Hong Kong. These plans were abruptly halted due to intervention from the Chinese government in 2020.

However, these strategies are not set in stone and may change, as per the sources. Ant Group chose not to comment on these developments.

Ant’s previous IPO attempts

This strategic move follows a nearly three-year-long scrutiny by Chinese regulators, culminating in a hefty fine of 7.12 billion yuan (approx. $995 million) levied on Ant Group this month. The regulatory troubles faced by Jack Ma have led to a massive erosion of nearly $850 billion in valuation from his business empire, including Ant Group and Alibaba Group Holding Ltd.

Ant’s restructuring plan could potentially solace shareholders caught up in the regulatory clampdown. According to an insider, these shareholders may be offered stakes in the spin-off entities at a nominal price, indicating that these ventures may need considerable time to mature.

Furthermore, Ant Group has secured shareholder approval to repurchase up to 7.6% of its shares at a valuation of about $79 billion. This represents a steep decline from its pre-IPO market cap of $280 billion in 2020, and its $150 billion valuation assigned by global investors, including Temasek Holdings Pte and Carlyle Group Inc., half a decade ago.

Interestingly, Alibaba Group, which owns one-third of Ant, has decided not to participate in the buyback, stating its intention to preserve its stake in a crucial partner. Several Chinese state-owned firms that had previously invested in Ant are considering participating in the buyback, say insiders.

Ant’s international operations, which are part of the potential divestiture, include the Alipay+ transaction network, WorldFirst (a digital payments and financial services platform for small businesses engaged in international trade), and ANEXT Bank, a digital wholesale bank in Singapore launched in June 2022.

Listing in Hong Kong could expedite the process, particularly since Jack Ma relinquished Ant’s controlling rights in January. Regulations in China prohibit domestic listing on the A-share market for companies with a change in control within the previous three or two years for the Shanghai STAR market, aimed at new technology companies. However, the waiting period for the Hong Kong stock exchange is just one year.

Despite the potential easing of Beijing’s scrutiny, the years of rigorous investigation have significantly impacted Ant’s business, leading to a decline in the company’s bottom line and growth prospects.

The proposed organizational split echoes that of Alibaba, one of Ant’s affiliates, restructuring into six primary businesses. Despite initial enthusiasm from investors, Alibaba’s shares have fallen significantly from their 2023 highs, losing about $600 billion since the regulatory clampdown on Ant.