Alibaba Won’t Join in Ant Group’s Approved Nearly $1 Billion Buyback

BEIJING, July 24 (TiPost)— Alibaba Group announced progress in its fintech unit Ant Group’s surprising buyback following conclusion of years long regulatory revamp.

Credit：Visual China

At a meeting held on July 23, shareholders approved Ant Group’s proposal to repurchase up to 7.6% of its equity interest, and Alibaba, as a shareholder that holds a 33% stakes in, decided not to join in the repurchase program, according to a filing with the Hong Kong Stock Exchange. Alibaba said its decision was made to maintain its holdings of Ant as the affiliate continues to be a key strategic partner of the Chinese e-commerce giant’s several businesses.

Ant Group’s share repurchase program was announced after Chinese regulators wrapped up its rectification since late 2021 with billions of dollars in penalties. Authorities decided to fine Ant RMB7.123 billion (US$984 million) for violations on various fields concerning corporate governance, consumer protection, banking, insurance activities, payment and settlement, anti-money laundering, and funds sales, the China Securities Regulatory Commission (CSRC) announced on July 6. The top securities regulator noted most of outstanding issues in the financial business of Ant, Tencent Group and other large platform operators have been addressed at the moment, so authorities now shift regulatory focus to regularized supervision. It added Ant was asked to shut down its crowd-funding healthcare platform Xianghubao and compensate affected consumers.

A day after CSRC’s announcement, Ant Group unveiled its proposal to buy back as much as 7.6% of shares, pending for shareholders’ approval. Any repurchased shares are planned to be transferred into its equity incentive pool. The program was deemed as a way to provide existing investors a way to exit or get some money back. It would cost Ant up to RMB43 billion and value the company at RMB567.1 billion (US78.5 billion), dropping about 40% from the post-money valuation in 2018. The Series C funding round in June 2018 brought Ant’s valuation to US$14 billion.

Alibaba has been gradually cutting ties with Ant and other affiliates these years. Ant said on January 7 that Alibaba’s founder Jack Ma will not control the majority voting interests in the company through Junhan and Junao after these entities complete changes in their voting structures. While equity interests and economic interests of shareholders including Alibaba in Ant remain unchanged as the result of the adjustments, neither Alibaba nor any other shareholder will have control over Ant. Ant also said it would add a fifth independent director to its board to make independent directors a majority of the board.

Alibaba unveiled late March to split into six business groups and five of them will have the flexibility to raise external capital and potentially to seek its own IPO, with the exception of Taobao & Tmall Group, which will remain wholly-owned by Alibaba Group. Alibaba’s chairman and CEO Daniel Zhang called the move “the most significant governance overhaul” since Alibaba’s inception and said each business group is fully responsible for its performance, with financial independence.

In his letter to shareholders released along with Alibaba’s annual report for the fiscal year ended March 31, 2023, Zhang hailed the new governance model of “1+6+N” a decision with far-reaching impact. He explained “1” represents Alibaba Group’s holding company, “6” refers to six major business groups – Cloud Intelligence Group, Taobao and Tmall Group, Local Services Group, Alibaba International Digital Commerce (AIDC) Group, Cainiao Smart Logistics Network Limited, and Digital Media and Entertainment Group, and “N” refers to various businesses such as Alibaba Health, Sun Art Retail, and Freshippo. Each entity in the “6+N” will establish its own board of directors that will provide oversight and support to the chief executive officer of the business, Zhang said. He vowed his company would focus on implementing good capital management, supporting the healthy development of our major business groups and various companies, and fostering the development of new innovative businesses.

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