- Ant Group is currently under investigation for anti-competition practices.
- The company was founded by Jack Ma.
- Ant Group is an Alibaba subsidiary.
Liang Tao, the vice president of the China Banking and Insurance Regulatory Commission (CBIRC), has underlined that the recent probe into Ant Group’s workings won’t undermine its growth and development. He said this during a press conference in which he quelled fears that the government was targeting private firms.
He also encouraged the current cooperation between banks and insurance firms and major internet conglomerates. He highlighted that the union between the two industries ultimately helped to bolster the fintech industry.
The recent probe into Alibaba and its major subsidiaries, such as Ant Group, rattled Chinese e-commerce investors and major tech firms. It caused Ant Group’s planned $37 billion IPO to be scrapped by regulators after it was found to be in violation of anti-competition rules.
Reports emerged indicating that China’s President, Xi Jinping, ordered for the scrutiny. He was reportedly piqued by Ant Group founder Jack Ma’s comments critiquing Chinese regulators.
Following the news, the People’s Daily, the official newspaper of the Chinese Communist Party, refuted claims about political involvement in Ant Group’s antitrust investigation. According to the publisher, strengthening of anti-monopoly laws would not cause “winter” in the sector.
Ant Group’s Valuation Could Half
There are fears that the ongoing investigations into Ant Group’s practices could severely undermine its position in the market. A recent Bloomberg Intelligence report indicated that Ant Group’s valuation could drop by approximately 50 percent if the new anti-competition measures were enacted.
“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,” analyst Francis Chan wrote.
The ongoing anti-competition probe into Ant Group’s workings means that the central bank could push for a breakup of the company, subsequently leading to its devaluation. That said, companies found to be in contravention of the anti-monopoly statutes will have a year to comply with the statutes. As such, the full effects of such a measure are unlikely to be felt immediately.
Another reason for a breakup is the sheer size of some of its subsidiaries. Ant Group’s subsidiary, Alipay, for example, has approximately 1 billion users, and currently controls about 55 percent of the mobile payments market in China.
According to Chan, this will be among the man trigger points for a devaluation. Companies that control over one-third of the market in China are going to face investigations for anti-competition moving forward, hence a breakup is always on the horizon.
Alibaba Has a New Rating
According to a just-released Moody’s Investors Service ratings review, Alibaba Group Holding Limited’s currently has an A1 issuer rating. The rating reflects the firm’s current diversification efforts and takes into account its sustainability model, which allows it to remain profitable.
The company has held the same rating since 2018, an indicator that investors still see its growth potential.