- Ant Group is currently under investigation for anti-competition practices.
- Ant Group’s IPO was halted.
- The Chinese government wants the company to restructure.
Alibaba’s Ant group valuation is likely to fall to $108 billion. This is according to Bloomberg Intelligence. The dip is attributed to the company’s currently ongoing anti-trust probe being undertaken by Chinese authorities. According to Bloomberg analyst Francis Chan, Ant Group is likely to see its valuation slashed in half due to the recently updated regulations.
Ant Group presently operates the B2B X-Border Blockchain Trading Platform, and Alipay, the most popular online payments platform in China. Other notable ventures in its product portfolio include Yu’e Bao, a major money-market fund, and Zhima Credit.
The sheer size of its network has made Chinese regulators uneasy and so the authorities are looking to break up some of its segments to prevent a monopoly.
“Ant Group’s valuation may plunge further if its payment unit is forced to break up due to potential anti-trust probes by China’s central bank,” Chan said.
Ant began experiencing problems with Chinese regulators on October 24 when Jack Ma, its founder, admonished Chinese regulators during the Bund Summit event.
He accused them of attempting to stifle innovation and technology by coming up with repressive policies. The speech led to him being summoned by Chinese authorities.
The next day, Ant Group’s $37 billion IPO was halted by the government, and a directive was issued calling for its restructure.
In a bid to quell tensions, Jack Ma reportedly made an offer to the Chinese government to have any of Ant Group’s subsidiaries. This is as reported by the Wall Street Journal.
“You can take any of the platforms Ant has, as long as the country needs it,” he said.
His remarks about the Chinese government in late October are reported to have piqued Chinese President Xi Jinping who promptly ordered an investigation into the company’s financial risks.
Consequently, new regulatory guidelines were introduced. Many of them were intended to rein in big tech firms such as Alibaba and its Ant subsidiary. The most recent raft of measures cover anti-competition practices. They prevent firms from banding together to stifle smaller companies.
The guidelines also prohibit user exclusivity requirements. There are also new rules regarding user data sharing that will have a direct impact on the country’s biggest tech firms.
Alipay, an Ant Group subsidiary, will most likely be targeted following a new rule which requires firms with a market share of over one third to be probed for compliance with ant-competition statutes.
The company processed over 50 percent of China’s third-party payments during the first quarter of 2020. Its rival, Tencent, handled approximately 40 percent of the payments during this period. It is also likely to come under scrutiny.
Regarding the latest raft of measures, Alibaba CEO, Daniel Zhang, has said that the new prohibitions are timely. His view contrasts sharply with that of Jack Ma, the company’s cofounder.
The public statement is most likely made to avoid further problems with Beijing.