By Julie Zhu and Josh Ye
HONG KONG (Reuters) – Ant Group announced a surprise share buyback on Saturday that values the fintech giant at $78.54 billion, well below the $315 billion announced in an abandoned IPO in 2020, which could allow some investors to exit after lengthy regulation. business redesign.
The news came a day after Ant was fined $984 million, which is expected to end a years-long regulatory upheaval by the company and mark a key step in concluding an internet industry crackdown. from the country.
Ant said it offered all of its shareholders to buy up to 7.6% of its stake at a price that represents a group valuation of around 567.1 billion yuan ($78.54 billion).
That’s a hefty 75% discount from the $315 billion 2020 valuation for what was expected to be the world’s biggest IPO if it hadn’t been derailed at the last minute by Chinese regulators.
“The repurchased shares will be transferred into Ant Group’s employee incentive plans to attract talent. The proposed buyout will also provide a liquidity option for investors in the company,” he said.
Ant’s major shareholders, Hangzhou Junhan Equity Investment Partnership and Hangzhou Junao Equity Investment Partnership, have voluntarily decided not to participate in the takeover, the company added.
Hangzhou Junhan and Hangzhou Junao are the entities that collectively own more than 50% of Ant’s shares on behalf of the company’s officers and employees.
“While Ant is repurchasing shares at a valuation well below the $150 billion figure in the company’s last fundraising in 2018, the plan provides liquidity to its existing investors,” said Zhang Zihua, chief executive. investments at Beijing Yunyi Asset Management, which is an investor in the subsidiary of Ant, e-commerce titan Alibaba.
“Liquidity could be more important than valuation for some investors looking to exit.”
He said neither he nor the markets expected the stock buyback at this point.
China’s central bank said on Friday that financial regulators would impose a total fine of 7.12 billion yuan on Ant and its subsidiaries.
The imposition of the sanction is seen as paving the way for the company to obtain a financial holding license, focus on bolstering growth and possibly reviving its IPO plans.
“China needs to resolve the Ant IPO to restore investor confidence,” said Wang Qi, managing director of China-focused asset manager MegaTrust Investment.
“Any progress here not only benefits Alibaba, but is also good for the internet and fintech industries as a whole.”
Founded by billionaire Jack Ma, Ant operates China’s ubiquitous mobile payment app, Alipay, as well as consumer lending and insurance product distribution businesses, among others.
In April 2021, Ant embarked on a sweeping restructuring of its business, which included its transformation into a financial holding company that would subject it to rules and capital requirements similar to those of banks.
For the wider tech sector, Ant’s fine marks a key step towards concluding China’s deadly crackdown on private companies, which began with the scrapping of Ant’s IPO in late 2020. and then erased billions from the market value of several companies.
Following the cancellation of the IPO and the forced restructuring, some of Ant’s global investors reduced their valuation of the company, with Fidelity bringing it down to $68 billion by mid-2021, Reuters reported.
“The takeover price is higher than the valuations made by many institutions internally…so I think some institutions will choose to participate in the takeover,” said 86Research analyst Hanyang Wang.
“At the same time, initiating a stock buyback also indirectly informs investors that the possibility of a resumption of the IPO in the short term is unlikely.”
On Friday, Chinese authorities also announced fines against two Chinese banks, an insurer and Tencent Holdings’ online payment platform Tenpay.
The People’s Bank of China (PBOC) said most of the major problems with the financial activities of platform companies have been ironed out and regulators will now shift from focusing on specific companies to regular overall regulation of the sector.
($1 = 7.2205 Chinese yuan renminbi)
(Reporting by Julie Zhu, Josh Ye, Brenda Goh, Zhang Yan and Scott Murdoch; Editing by Shri Navaratnam and Kim Coghill)