The shares of Alibaba, an e-commerce group founded by Jack Ma, fell sharply after Beijing publicly accused its payments department of regulatory failure in its latest bailout for one of China’s richest men.
The comments of Pan Gongsheng, deputy governor of the People’s Bank of China, were posted on the central bank’s website on Sunday, and the country’s authorities have increased pressure on Jack Ma’s business empire.
In early trading in Hong Kong, Alibaba’s stock price fell 7.3%, its lowest level since July. The People’s Bank of China’s reprimands cover up Alibaba’s move to increase its two-year stock repurchase program from US$6 billion to US$1
Since Jack Ma publicly criticized China’s financial regulators and state-owned banks in late October, the company’s stock price has fallen by more than 25%-about $260 billion from Alibaba’s market value. Bloomberg data shows that Jack Ma was once the richest man in China, and his personal wealth has fallen from just under 62 billion US dollars to 49.3 billion US dollars.
300 billion USD
Ant Group’s minimum valuation recommendation before IPO
After Jack Ma made the remarks, the Chinese government also stopped the US$37 billion initial public offering of Ant Group, the online financial arm of Alibaba. This triggered criticism from the public, official media, and the government against the so-called monopolistic behavior of the two companies.
China’s market regulator announced last week that it will launch an antitrust investigation of Alibaba, and Ant Financial confirmed that it has been called to meet with the People’s Bank of China and three other regulators.
On the second day after representatives of the People’s Bank of China and Ant Financial held a meeting in Beijing, Mr. Pan’s comments refocused investors’ attention on the financial services group. Ant has been trying to restructure its business in an attempt to restart the IPO next year.
However, Mr. Pan’s attack confirmed a difficult task. He said that Ant Financial will have to “return to its origin” as a payment service provider and “correct” its fastest growing and most profitable consumer credit and wealth management business. Ant has started this process in recent weeks, but investors expect that if it can return to the market, it may affect the company’s valuation.
Ant Financial’s IPO was originally the largest in the world, and its valuation will exceed US$300 billion.
Analysts are not sure whether the restructuring can meet the requirements of the regulatory agencies, or whether Ant Financial must sell or close part of its consumer credit business. The latter has aroused fierce criticism from state-owned banks, believing that ants benefit from loose supervision.
The parallel move to Alibaba, which is listed in Hong Kong and New York, has further enhanced Jack Ma’s interests. Jack Ma was founded more than 20 years ago in Hangzhou, the capital of Zhejiang Province in eastern China.
After the State Administration for Market Regulation disclosed its investigation of Alibaba on December 24, Zhejiang officials confirmed that they had interviewed company employees and removed materials from the group headquarters. Zheng Shanjie, the mayor of Zhejiang Province, said on Friday that the purpose of this survey is not to welcome the “winter” of online companies, but to mark a new “starting point” for the development of the industry.
Other reports by Liu Xinning and Ryan McMorrow in Beijing