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Jack Ma’s Ant Group Co.’s plan to raise 10.5 bn yuan ($1.5 bn) for its consumer-lending unit has been green-lit by the China Banking and Insurance Regulatory Commission division in Chongqing. The regulatory body’s approval to raise money means the company will be able to elevate its registered capital to 18.5 bn yuan ($2.7 bn). This is a part of the fintech giant’s efforts to restructure its operations to meet regulator expectations.
Ant contributed 5.25 bn yuan towards Chongqing Ant Consumer Finance, Ant’s consumer-lending businesses, which got the green light to increase its capital to about $2.7 bn on December 29. Under the plan, Ant will have rights to 50% of the company’s share. Meanwhile, another unit owned by the municipal government of Hangzhou will have control over a 10% stake after the deal, making it the second-largest stakeholder. The deal also incorporates new investors like Sunny Optical Technology Group Co. and Jiangsu Yuyue Medical Equipment & Supply Co.
Jack Ma’s Ant Group back in form?
The decision removes a major hurdle for Ant in its efforts to meet the regulator’s demands after the company’s initial public offering was shelved in 2020 as Beijing cracked down on the fintech company. Jack Ma’s Ant Group was warned at the time that it needed to restructure its numerous business areas, including increasing its capital adequacy ratio to mitigate risks.
Ant’s initial capital increase for the Chongqing unit was planned to be $3.5 bn, but the figure was cut after China Cinda Asset Management, which was going to contribute a fifth of the amount, broke away from the deal without citing a reason.
The regulatory nod may be perceived as a sign that the Chinese government is trying to ease the pressure on homegrown tech giants as growth has slowed down. The move had ripple effects on the stock market as several companies including Tencent and Ma’s Alibaba Group Holding Ltd. rose 4% and 7.7%, respectively on January 4. The Hang Seng Tech Index rose by 3.3% on the same day.
Meanwhile, Ant has announced that Ma is giving up his controlling rights of the financial giant. According to an official announcement last weekend, the company is offering independent voting rights to 10 people, including the founder, management and employees. Bloomberg calculated that Ma will have about 6.2% of the voting rights after the adjustment.
On the other hand, the change of control could push Ant Group’s plans of going public even further back. In China, companies cannot list on the A-share market if a change in control happenened in the past three years. For Shanghai’s STAR market the waiting period is two years and for Hong Kong’s stock one year.
This article was first published on January 6, 2023, and updated on January 9, 2023.
