China clips Ant Group’s wings

Darren Sinden

The activities that the central bank wants Ant Group to withdraw from are among the fastest growing and most profitable parts of the financial conglomerate


Authorities in China have continued to crank up the pressure on Jack Ma and his online empire, having announced an investigation into possible monopolistic practices at Alibaba the authorities have now ordered Ant Group to scale back its activities.

PBOC Deputy Governor Pan Gongsheng said: “ Ant’s corporate governance was not sound” and ordered it to “ return to its origins” as a payment services provider, warning that Ant had to “strictly rectify illegal credit, insurance and wealth management financial activities”.

It seems Ant Group has little choice but to comply, with the company issuing a statement in which it said it would form a rectification working group and would fully implement the requirements demanded by the regulators.

The activities that the central bank wants Ant Group to withdraw from are among the fastest growing and most profitable parts of the financial conglomerate and that creates an issue not only for Jack Ma but also for fund managers and venture cap firms that have backed Ant Group. These include Carlyle, Temasek and GIC those funds were looking forward to realising a handsome profit on their investment with the planned IPO of Ant Group.

However, that was cancelled by Chinese authorities just days before going live in early November as regulators met with Jack Ma and took him to task.

An Ant Group IPO now seems unlikely at least in its current form and without the faster growing and profitable divisions of the business its valuation would be reduced significantly. The payments processing part of the business is a low margin and potentially loss-making division on its own.
The attraction for investors was to be found in the cross-selling opportunities that the large customer base within the payments division provided to the rest of the group.

It’s thought that Jack Ma had tried to avert a formal break up of Ant Group by offering the Chinese authorities parts of the financial conglomerate but those proposals seem to have fallen on deaf ears. What the status of the overseas investors in Ant Group will be going forward remains unclear though they will surely have to significantly write down their investments.

China’s state pension fund is also believed to have bought a 5% stake in the business back in 2015 when Ant Group was valued at $45.0 billion, by 2018 the company’s valuation had risen to $150.0 billion. A valuation balloon that must be deflating rapidly.

The sharp change in Ant Group’s fortunes is reminiscent of what happened to WeWork as it tried to IPO at a sky-high valuation. Investors had no appetite for the collaborative workspace group and once their confidence was lost the IPO was shelved, forcing lead investor SoftBank to take control of the business and write off the majority of its value.

It may be that Ant Group will be allowed to sell off the businesses that PBOC wants it to withdraw from rather than just winding them down. Might it be allowed to package them together into a separate entity which it could sell to a competitor or list independently?

That would likely take time and a certain amount of patience, however, on the part of the Chinese authorities, something that may not be forthcoming.

Read this next

Digital Assets

Valkyrie pulls back on Ether futures merge with Bitcoin ETF

Valkyrie Funds LLC will suspend the purchase of Ether (ETH) futures contracts for its Valkyrie Bitcoin and Ether Strategy ETF (BTF.O). Additionally, the firm will unwind any positions in Ethereum that it has already acquired.  

Digital Assets

Hong Kong police arrest 18 in $1.5B billion JPEX fraud

The investigation into the JPEX crypto exchange scandal continues to unfold as Hong Kong and Macau police arrest four more individuals. These arrests, which include individuals considered “relatively close to the core” of the scandal, bring the total number of detentions to 18.

Digital Assets

Gemini tells Dutch users to withdraw assets by November 17

Gemini, the cryptocurrency exchange founded by Cameron and Tyler Winklevoss, announced that it will cease providing services to customers in the Netherlands, citing regulatory requirements imposed by the country’s central bank.

Digital Assets

SEC puts BlackRock, Valkyrie, and Bitwise Bitcoin ETFs on hold

The U.S. Securities and Exchange Commission has delayed its decisions on several bitcoin exchange-traded fund (ETF) proposals, leaving many in the crypto industry feeling pessimistic for any future blessing from the agency.

Digital Assets

Ripple backs out of Fortress Trust acquisition

Ripple has decided to cancel its planned acquisition of Fortress Trust, a custodian company, less than a month after initially announcing the agreement.


France regulators blacklists 21 FX brokers, FuturBTC

France’s financial markets regulator, the Autorité des Marchés Financiers (AMF), today shed light on several unregulated forex brokers representing their offering under several brands. Notably, the AMF has identified only one crypto-assets provider in its latest warning.  

Digital Assets

Flare and Arkham Collaborate for Enhanced Decentralized Data Access

Flare’s blockchain for decentralized data acquisition integrates with Arkham’s Intelligence Platform, offering users advanced analytics and actionable on-chain insights.

Industry News

iFX EXPO International 2023 Successfully Concludes

The most talked about financial event of the year took place in Limassol, Cyprus.

Retail FX

Plus500 Forex Garners Market Attention In The Latest Expert Ranking

Securing the 58th spot in Traders Union’s Best Forex Brokers of 2023 ranking, Plus500, despite its cautionary overall score of 6.3 out of 10, stands out for its stringent regulatory compliance, user-centric WebTrader platform, and a commendable focus on account security, though it lags in providing advanced trading tools and trust management features.