Day: January 7, 2023

Ant Group’s founder Jack Ma will give up control of the Chinese fintech giant in an overhaul that seeks to draw a line under a regulatory crackdown that was triggered soon after its mammoth stock market debut was scuppered two years ago.

Ant’s $37 billion IPO, which would have been the world’s largest, was cancelled at the last minute in November 2020, leading to a forced restructuring of the financial technology firm and speculation the Chinese billionaire would have to cede control.

While some analysts have said a relinquishing of control could clear the way for the company to revive its IPO, the changes announced by the group on Saturday, however, are likely to result in a further delay due to listing regulations.

China’s domestic A-share market requires companies to wait three years after a change in control to list. The wait is two years on Shanghai’s Nasdaq-style STAR market, and one year in Hong Kong.

A former English teacher, Ma previously possessed more than 50% of voting rights at Ant but the changes will mean that his share falls to 6.2%, according to Reuters calculations.

Ma only owns a 10% stake in Ant, an affiliate of e-commerce giant Alibaba Group Holding Ltd (9988.HK), but has exercised control over the company through related entities, according to Ant’s IPO prospectus filed with the exchanges in 2020.

Hangzhou Yunbo, an investment vehicle for Ma, had control over two other entities that own a combined 50.5% stake of Ant, the prospectus showed.

Ma’s ceding of control comes as Ant is nearing the completion of its two-year regulatory-driven restructuring, with Chinese authorities poised to impose a fine of more than $1 billion on the firm, Reuters reported in November.

The expected penalty is part of Beijing’s sweeping and unprecedented crackdown on the country’s technology titans over the past two years that has sliced hundreds of billions of dollars off their values and shrunk revenues and profits.

But Chinese authorities have in recent months softened their tone on the tech crackdown amid efforts to bolster a $17-trillion economy that has been badly hurt by the COVID-19 pandemic.

“With the Chinese economy in a very febrile state, the government is looking to signal its commitment to growth, and the tech, private sectors are key to that as we know,” said Duncan Clark, chairman of investment advisory firm BDA China.

“At least Ant investors can (now) have some timetable for an exit after a long period of uncertainty,” said Clark, who is also an author of a book on Alibaba and Ma.

REGULATORY SCRUTINY

Ant operates China’s ubiquitous mobile payment app Alipay, the world’s largest, which has more than 1 billion users.

Ant, whose businesses also span consumer lending and insurance products distribution, said Ma and nine of its other major shareholders had agreed to no longer act in concert when exercising voting rights, and would only vote independently.

It added that the shareholders’ economic interests in Ant will not change as a result of the adjustments.

Ant also said it would add a fifth independent director to its board so that independent directors will comprise a majority of the company’s board. It currently has eight board directors.

“As a result, there will no longer be a situation where a direct or indirect shareholder will have sole or joint control over Ant Group,” it said in its statement.

Reuters reported in April 2021 that Ant was exploring options for Ma, one of China’s most successful and influential businessmen, to divest his stake in Ant and give up control.

The Wall Street Journal reported in July last year, citing unnamed sources, that Ma could cede control by transferring some of his voting power to Ant officials including Chief Executive Officer Eric Jing.

Ant’s market listing in Hong Kong and Shanghai was derailed days after Ma publicly criticized regulators in a speech in October 2020. Since then, his sprawling empire has been under regulatory scrutiny and going through a restructuring.

Once outspoken, Ma has largely remained out of public view since the regulatory crackdown that has reined in the country’s technology giants and did away with a laissez-faire approach that drove breakneck growth.

“Jack Ma’s departure from Ant Financial, a company he founded, shows the determination of the Chinese leadership to reduce the influence of large private investors,” said Andrew Collier, managing director of Orient Capital Research.

“This trend will continue the erosion of the most productive parts of the Chinese economy.”

As Chinese regulators frown on monopolies and unfair competition, Ant and Alibaba have been untangling their operations from each other and independently seeking new business, Reuters reported last year.

Ant said on Saturday that its management would no longer serve in the Alibaba Partnership, a body that can nominate the majority of the e-commerce giant’s board, affirming a change that started mid-last year.

 

Source: Voice of America

 

 

The past year has been difficult for startups everywhere, but running a company in Ukraine during the Russian invasion comes with a whole different set of challenges.

Clinical psychologist Ivan Osadchyy brought his medical device, called Knopka, to this year’s consumer technology show known as CES in Las Vegas in hopes of getting it into U.S. hospitals.

His is one of a dozen Ukrainian startups backed by a government fund that are at CES this year to show their technology to the world.

“Two of our hospitals we operated before are ruined already and one is still occupied. So this is the biggest challenge,” Osadchyy said.

“The second challenge is for production and our team because they are shelling our electricity system and people are hard to work without lights, without heating in their flats,” he said.

Inspired by grandmother

He came up with the device after spending a year with his own grandmother in the hospital and finding that he had to track down nurses when she needed something.

The system works by notifying nurses when a patient has an abnormal heart rate, is due for treatment or otherwise needs help. The nurse can’t turn off their button until they’ve dealt with the issue.

“We are still working and operating because hospitals are open and we need to support them and provide efficiency and safety for patients as well,” he said.

Karina Kudriavtseva of the government-backed Ukrainian Startup Fund, says that, like Knopka, all the country’s startups have kept going since Russia’s invasion almost a year ago.

“The times have changed, their conditions have changed, but it can only make them stronger because all of the startups are working on the thing that to save the company, save the team, save the business, and save their lives, of course,” she said.

Conflict led to relocation, innovation

The invasion forced Valentyn Frechka to relocate to France, but he says his Releaf paper company has never stopped production.

When he was 16, Frechka decided to study alternative sources of cellulose in order to decrease deforestation. He’s now developed a technology that uses fallen leaves and recycled fiber to make paper.

The company’s main product is paper shopping bags, but they also make food packaging, egg trays and corrugated boxes.

Frechka said the conflict has forced the company to become more flexible and more open to opportunities.

“When this conflict happened and we located our company to France, we have found a lot of new partners and we have raised fundraising. We have raised the money for our needs,” he said. “So, it really makes us more open for the world.”

 

 

Source: Voice of America