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The Sad End Of Jack Ma Inc.

Jack Ma

One year ago, Ma was the richest man in China. He was the creator of Alibaba – China’s largest tech company – and The Ant Group, the largest Fintech company in the world. His corporate empire had reached private-sector superpower status, on a par with the Western FANG-giants. Alibaba alone was worth more than any U.S. company except for Apple, Amazon and Google.

Ma was also a worldwide celebrity – the most famous living Chinese person. According to polls he was more well-known outside China than Xi Jinping. Jack Ma was Jeff Bezos, Elon Musk and Bill Gates all rolled into one. He was the front-man for the new China:

The abrupt reversal of his fortunes has been shocking to watch. Ma’s assets have been stripped, shorn, and degraded.

The Canceled Ant IPO

The last-minute quashing of the Ant Group’s Initial Public Offering was the opening shot . The offering would have set a world record. (In fact, Alibaba’s IPO in 2014 had been the largest ever at that time. Ant’s was to have surpassed it by 40%.)  

The size of the deal itself doesn’t portray the scale of the financial phenomenon. The Ant IPO had become – by October 2020 – a true frenzy. The share price on the private market ran up 50% ahead of the effective date, and the offering was said to have been 80 times oversubscribed. The Wall Street Journal called it a “a $3 trillion scramble.” 

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Ma was triumphant. It would be, he said,

  • “the biggest IPO in human history. Furthermore, for the first time ever, it is set in a city other than New York . . . A miracle is happening.” 

The WSJ reported that order book exceeded “the value of all the stocks listed on the exchanges of Germany.” 

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Then — Beijing killed the deal.

Who is the current richest man in China?

Carving up the Company  

Following the IPO fiasco, regulators began to disassemble Ant. Its consumer financing business was set to be restructured, with new “partners.” 

  • “The central bank ordered Ant to form a separate financial holding company that would be subject to the kind of capital requirements applied to banks. That could open a door for big state banks or other types of government-controlled entities to buy into the firm.”

The government also had its eye on one of Ant’s most valuable assets – its data, derived from billions of consumer transactions it processes. The tech-intensive analytics generated from this resource have been the basis of Ant’s competitive advantage over the less technologically sophisticated traditional banking sector in making consumer credit decisions. Beijing aimed to “rectify” that, too.

  • “Ant will also be required to break an “information monopoly” on the vast and detailed consumer data it has collected, the central bank said.”
  • “Hiving off the treasure trove of data on more than 1 billion people is a key part of Ant’s business overhaul in response to a regulatory crackdown.”

Neutering Ant’s Money Market Fund

Ant’s Group’s money market fund was perhaps its most amazing and explosive success story. In just four years, the fund became (briefly) the world’s largest, surpassing the American establishment giants like Fidelity and JP Morgan and “shocking banking executives around the world.” Ant built this fund up by inviting Chinese consumers to hold their spare cash (“leftover treasure” in Chinese) in these accounts. 

Beijing took note. Ant’s business was thrown into reverse, shrinking 18% in the first quarter of this year, and down almost 50% from its peak.

Chinese authorities have piled on other penalties, which seem minor, or tangential, but in context they display Beijing’s animus even in petty matters. 

For example, the company’s highly popular Internet browser – number 2 in the Chinese market with over 400 million active users – was deleted at Beijing’s insistence from the app stores of most mobile and Internet companies in March.  

Closing Ma’s Hupan University 

Also in April, Ma was removed as president of Hupan University, the ultra-elite business school he founded and endowed in 2015.

This is to my mind the saddest of all these injuries. The plan for Hupan was ambitious, bold, innovative. It promised a fresh approach to business education, in some respects going beyond anything done elsewhere. 

Huarong

Now, the worst of it – 

It was reported last week that “regulators approved Jack Ma’s Ant Group to start running a new finance company.” It will absorb the most profitable part of Ant — the consumer lending business. Ant will contribute its massive portfolio of $155 Bn in outstanding loans.

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