Ant Group Expected To Convert To Holding Company, Faces Bank-like Regulation

Fintech giant Ant Group, an affiliate to the Alibaba Group with business interests ranging from international digital payments platforms and consumer lending to food delivery, has seen its prospects for an initial public offering—recently touted as one of the largest in history—stymied in recent months due to efforts by the Chinese government to increase its scrutiny and regulation of large financial and technology companies. The company is now facing new controls announced in September 2020, with many of the specifics having yet to be made public by government regulators.

Now, following months of regulatory challenges, the company has put forth a possible restructuring plan in cooperation with Chinese financial regulators. While an early proposal by Jack Ma’s technology and financial powerhouse saw only financial operations being placed into a holding company, it now appears likely that all of its businesses, from payments platform Alipay to mutual protection plan Xiang Hu Bao, will find themselves brought under the same regulations and capital requirements Chinese banking institutions must also adhere to.

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The move of all its businesses into the holding company may reduce the necessity to spin off many of its subsidiaries and may ultimately result in a pathway back to its hoped-for IPO. However, the new requirements have made a non-trivial impact upon the company: its previous rapid expansion is likely to be slowed as it adapts to the new business structure and as-yet unpublicized regulations. Bloomberg Intelligence analyst Francis Chan estimates Ant’s valuation could drop to $108 billion, down from a $280 billion pre-money valuation before its IPO was halted.

It is likely that the Chinese government will continue to build and refine its regulatory structure in the new year, with businesses having to rapidly adapt to the new rules as they are adopted and announced.

While neither the company nor its well-known founder have made any public announcements about the new normal, investors are hopeful that the coming weeks will bring clarity and stability to a highly uncertain situation for Ant Group and its stakeholders.