Ant Group bows to Beijing with company overhaul

Jack Ma’s firm to fold all financial operations into holdco

China told Ant Group to become a financial holding company that will be regulated more like a bank, directing an overhaul that was set in motion when the fintech giant’s record initial public offering was abruptly halted last year. At a meeting on Monday, the central bank ordered Ant to rectify its business in five areas, including eliminating unfair competition in its payments business, managing liquidity risks in its major fund products, ending a monopoly on information and improving corporate governance, according to a government statement. It also told the firm to cut the outstanding value of its moneymarket fund Yu’ebao.

The overhaul creates a definitive supervision framework for the biggest player in the country’s sprawling fintech sector. Several government agencies, including the People’s Bank of China, the banking and securities regulators met with Ant to dictate the overhaul.

The recast is a step toward meeting the demands of China’s watchdogs, who have pledged this year to curb the “reckless” push of technology firms into finance and are examining monopolies online.

Regulators also this month imposed a record $2.8 billion antitrust fine on Ant’s affiliate Alibaba Group, lifting a cloud of uncertainty hanging over Ma’s e-commerce empire. “The darkest hour for Alibaba has passed, but I wouldn’t say so for Ant Group,” said Dong Ximiao, a chief researcher at Zhongguancun Internet Finance Institute. “The latest announcement clarified the framework for Ant’s restructuring, but the tone is still harsh and some of the requirements are tougher than expected. I don’t think the overhang is removed for Ant investors at this stage.” The measures are likely to drastically reduce Ant’s valuation in an IPO, according to estimates from Bloomberg Intelligence. It may be valued at less than $108 billion under previous draft proposals, which could reduce the value of Ant’s Alipay service by half, according to senior analyst Francis Chan. While the measures subject Ant to tighter regulations, it could leave the company’s overall structure intact.

In a statement, Ant said it could fold those lending units into the consumer finance arm and that it would apply for a company license for personal credit reporting and improve consumer data protection.

Ant will plan its growth “within the national strategic context,” and make sure that it shoulders more social responsibility.